ETs review on mutual fund schemes this quarter

 After a dismal June ’06 quarter, the new height scaled by the domestic stock market has benefited equity fund investors. ET’s Platinum funds among equity-linked savings schemes (ELSS) — Sundaram Tax Saver and Principal Punjab National Bank (PNB) Tax Savings Fund — held on to their prime positions in the ET Quarterly MF Tracker for July-September ’06, delivering around 14% each. Anoop Bhaskar (Sundaram Tax Saver) and R Srinivasan (Principal Tax Savings) are the fund managers for ET’s Platinum funds in the ELSS category.

During the September ’06 quarter, not many changes occurred in the fund classifications compared to the previous quarter. Birla Sun Life Tax Relief 96 moved up the ladder, bagging a Gold rating, while HDFC LTP Advantage was down with Silver.

ELSS, on an average, gave a return of 13.8% during the quarter, while ET 100 gave a return of 17.9%. Over a one-year period, ET 100 gave a return of 39.1% and surprisingly, none of the funds classified by ET outperformed ET 100 returns. However, ELSS funds performed better over the three-year period. Around 65% of the funds managed to outperform ET 100 by giving a return of 212.2%, while ET 100 gave a return of 183% over the three-year period.

In terms of absolute returns, Prudential ICICI Tax Plan was the top performer, giving 23.4% returns, followed by Birla Sun Life Tax Relief 96, which delivered a return of 21.8%. The latter has been promoted to the Gold category from Silver in the previous quarter.

The fund was overweight on telecom, banking, transportation, cement, auto and auto ancillary stocks, and underweight on metals, commodities and oil & gas.

Jayesh Gandhi, former fund manager, Birla Sun Life MF, says, “We create a diversified portfolio spread across sectors and avoid large stocks and sector-specific concentration. The fund focuses on quality companies with scaleable businesses and sustainable earnings with strong visibility.”

The assets under management (AUM) of ELSS touched Rs 2,643 crore at the end of the June quarter, and grew to Rs 3,331 crore at the end of the September quarter. The growth in AUM in the ELSS category has been almost entirely on account of appreciation rather than fresh flows. ELSS typically witnesses inflows towards the end of the financial year as investors flock to these funds for tax-planning.

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