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Mutual Fund Review: RELIGARE TAX PLAN

This fund has made its mark in a short period. It provides good downside protection capabilities, accompanied with decent returns during markets rallies. This will reward investors in the long run.

The fund invests across market capitalisation and sectors, utilising a bottom-up approach. With an allocation of over 60 per cent to mid- and small-caps, and a tightly packed portfolio of around 35 stocks, one would have expected the fund to be thrashed in the market downturn of 2008. But its fall of around 50 per cent was six per cent below the category average and five per cent less than the BSE 100, that too without a high cash exposure. Stock picking made all the difference. Of the 38 stocks which appeared for six months or more in the fund's portfolio in 2008, 16 experienced afall lower than the Sensex. The fund's focus on bottom-up selections leads to quality picks. Momentum plays are avoided, which may result in subdued returns during market rallies.

The fund follows a multi-cap strategy. Although benchmarked against the BSE 100, the base universe is the BSE 200, to which stocks in the CNX Midcap index are added. A few handpicked companies from the BSE Small Cap and BSE PSU indices are also considered. This universe is reviewed every quarter. Aggressive sector bets, too, are not unusual for the fund.

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