What is your outlook on SBI Magnum Tax Gain Fund? Do you recommend investing in this scheme? —Meenakshi, Lucknow
SBI Magnum Taxgain primarily seeks capital appreciation by investing into equities and also offers a deduction on the investments made under Section 80C of the Income Tax Act, 1961. Overall though the fund has been an average performer across market scenarios in terms of returns generated over one year, its risk-reward ratio is unimpressive on a relative basis in the ELSS category. Moreover, once Direct Tax Code (DTC) comes into effect ELSS schemes will no longer enjoy the tax exempt status. Considering the above, it will be prudent to look at investing in a fund which has been consistent in its performance across market cycles.
My advisor made me invest in ICICI Prudential Infrastructure Fund. Should I continue investing in this fund?
—Raman Kumar Singh, Delhi
Infrastructure sector as a whole has been an underperformer since the lows of 2008 and is still facing difficult times given the high cost of borrowings, delay in project execution, policy inaction and global concerns. On the performance front, the fund has been an underperformer in the infra fund space against peers. Therefore, it is advisable to avoid this fund and go for a large cap fund with a well diversified portfolio and a consistent track record.
Please advise if I should continue to hold the units of Birla Sun Life '95 Fund.
—Manohar Lele, Pune
It is a balanced fund and in line with its objective, the fund has rightly invested 72 per cent in equities and the rest in debt and money market instruments. The fund's exposure to defensive stocks is at 10 per cent which is satisfactory from a near term perspective. It also appears that the fund has increased its exposure to interest rate sensitive stocks like automotive companies in its portfolio, given the likelihood of a cut in interest rates by RBI. The fund has been a satisfactory performer across 3-5 years time period. Given its performance over longer periods, a relatively low beta, a satisfactory sharp ratio and its ability to contain downsides, it would be prudent to hold on to this scheme for now.