Religare Tax Plan has outpaced its larger rivals with good returns. But being a new player in the industry, the fund may take some time to prove its mettle
RELIGARE is a relatively new asset management company of the Indian mutual fund industry and so is its tax-saving scheme, Religare Tax Plan. Launched in December 2006, this fund has just completed a little over three years managing assets of just about 100 crore. It is thus a relatively small fund. But its small size has not deterred it from generating returns nearly at par with some of the best established taxsaving schemes of the industry.
PERFORMANCE:
Since its inception in December 2006, the fund has consistently outperformed its benchmark — the BSE 100 as well as the major market indices. An investment of 1,000 in this fund at the time of its launch would have grown to 1,728 today, a return of about 73%. The BSE 100 index gained over 37% while the Sensex and the Nifty earned around 30% and 35%, respectively during the period.
A year-wise analysis of the fund's performance reveals that Religare Tax Plan has not only succeeded in aptly rewarding its investors in market rallies, but also curtailed the fall in its net asset value (NAV) in the downturn. In 2007, for instance — the first year of its launch — the fund returned about 64% against 60% gains by the BSE 100. The average of the category of tax-saving schemes was about 60% in the year.
While the market meltdown year of 2008 did erode the fund's NAV by about 49%, it was nevertheless better placed than the average erosion of about 56% in the NAV of the category of tax-saving schemes. The BSE 100 too had fallen off by nearly 55% in that year. In fact, it was in 2008 that Religare Tax Plan first came into the limelight as it was ranked way ahead of its peers given its ability to curtail the downside risk.
The following year, 2009, which saw the markets make a dynamic recovery after the global financial meltdown, Religare Tax Plan made a smart comeback, generating over 83% gains. While these returns were definitely higher than those of the broader market indices, the fund did fall marginally short in beating the BSE 100 which returned about 85% that year. But this shortfall has been aptly made up by the fund this year.
Religare Tax Plan has already made nearly 14% gains since the beginning of the current calendar year as against 3-5% returns made by BSE 100.
PORTFOLIO:
For a fund with assets under management of just about 100 crore, Religare Tax Plan is extensively diversified, incorporating more than 50 stocks in its kitty. While this definitely reduces the stock-specific risk of its portfolio, it nevertheless makes the job of the fund manager a tad more difficult to keep track of such a large portfolio.
Given its multi-cap orientation, the fund has a fine blend of both large and midcap companies, and some of these, which were invested into in early 2009, have proved out to be multi-baggers for the fund. These include stocks like Bata India, Eicher Motors, BGR Energy Systems and Lupin among others.
It is also interesting to see the fund regularly churn its portfolio despite being a tax saving equity mutual fund scheme. Usually, tax-saving schemes, given their lock-in period of three years and thus no redemption pressures, tend to hold investments for a fairly long term.
Religare Tax Plan, however, appears to be pretty active in managing its portfolio and has an average holding period of about a year. In fact, it is only the large-cap blue-chip stocks, considered to be the most liquid of all counters that enjoy a long term holding with Religare Tax Plan.
An evaluation of the fund's current portfolio reveals that nearly 77% of its equity portfolio is currently quoting a price higher than the cost of acquisition, and some of its highly profitable holdings include Bosch, HDFC Bank, Nestle, Bhel, HDFC, Manappuram General Finance & Leasing, Power Finance Corp, Apollo Hospitals, Page Industries and Asian Paints.
Religare Tax Plan's exposure to consumer-centric sectors such as FMCG, healthcare and automobiles, which have handsomely gained in the market in the past few months can be construed as a reason for the fund's success so far. Moreover, the fund also has a good exposure to IT which is expected to do well in the coming months after the unexpected good results in the last quarter.
OUR VIEW:
Religare Tax Plan has undoubtedly surpassed the performance records of some of the well-established funds of the industry. But this is just the beginning, not only for this fund but also for its fund house Religare, which is a relatively new player in the MF industry.
It is thus pertinent for both the fund house and its schemes to establish themselves in this highly competitive mutual fund market, especially after the Sebi regulations.
