| Type |
Open-ended tax-saving
|
Benchmark |
BSE 100
|
| Min. Investment |
Rs 500 |
Face Value |
Rs 10 |
| Entry Load |
2.25%* |
Exit Load |
Nil |
| Issue Opens |
November 20, 2006 |
Issue Closes |
December 11, 2006 |
|
* On lump sum and SIP investments for all amounts.
|
To generate long-term capital growth from a diversified portfolio of predominantly equity and equity-related securities. There is no assurance that the objective of the scheme will be realized and the scheme does not assure or guarantee any returns.
*Source: Offer document
| |
AMCs (Asset Management Companies) are getting into a tax-saving mode, which should not surprise anyone given that there are only about 4 months left for investors to finalise their tax-planning investments. So the flurry of tax-saving funds comes at a rather opportune moment for the investor, who has an eye on this fund category.
To be sure, tax-saving funds (also referred to as equity-linked saving scheme/ELSS) can add considerable value to the risk-taking investor wanting to save tax (under Section 80C) through equity investments. Add to this the fact that, investments in tax-saving funds are subject to a lock-in of 3 years, which in a way compels both the investor and the fund manager to take a long-term view on stock markets. Equity investments must, in any case, be made for the long-term, so a tax-saving fund fits like a glove in the aggressive investor's portfolio.
Lotus India Tax Plan (LITP) is the maiden equity-linked offering from Lotus India Mutual Fund. While the fund house is new to the domestic mutual fund industry, Temasek (which is indirectly its Sponsor through Alexandra) does have an India office and has even been involved in some private equity deals. However, in terms of fund management, this is the first Indian venture of its kind for Temasek.
In our view, investors should invest in existing tax-saving funds with established track records over the long-term. Two funds that come immediately to our mind are HDFC Long Term Advantage Fund (a conservative, value style fund) and HDFC TaxSaver (an aggressive, growth style fund). Since Lotus India Mutual Fund has yet to make its presence felt in the domestic fund management industry, investors should first evaluate its investment approach and processes over a time frame of 3-5 years across market cycles (particularly the downturns) before committing money to the fund house.
|
LITP is mandated to invest 80%-100% of its assets in equities and equity-related instruments from across market capitalisations (small, mid and large caps). It can venture upto a maximum of 20% in money market instruments. LITP can also invest upto 50% of assets, subject to the limits specified by SEBI (Securities and Exchange Board of India) from time to time, in index futures, stock futures and options.
| Instruments |
Allocation Range |
| Equities and equity related securities |
80%-100% |
| Money market instruments |
0%-20% |
On the equity side, as a practice, the fund house aims to maintain a 'concentrated well-researched portfolio' of around 20-50 stocks. Within this range, the number of stocks for a scheme will vary depending on its size and mandate. The fund house's rationale for maintaining a trim portfolio is that over-diversification can lead to reduction of investors' returns.
|
Mr. Sanjay Kumar Chhabaria, is Fund Manager - Equity. He is an MBA and CFA with over 8 years of experience in equity research and fund management. Prior to joining Lotus India Asset Management Company Private Limited in January 2006, he was associated with SBI Funds Management Private Limited for two years as a Fund Manager. He has also put in stints with IDBI Capital Market Services Limited among other firms.
|
By investing across market capitalisations, LITP will be able to make the most of investment opportunities across mid caps and large caps. The flexibility to invest in cash/debt can help the fund cut losses in equities during stock market volatility. However, if the fund maintains a concentrated portfolio as it has professed, it will have to get a majority of its stock and sectoral calls correct to keep volatility on a leash during stock market turbulence.
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