Bird is an optimistic fund manager. Buffalo is a cynical retail investor.
Here’s what they have to say about Birla Sun Life Tax Relief ’96 this week
Sundaresha Subramanian
Mumbai, January 29, 2007
”CAN SOME questions really change a person’s life?” asked the bird, still in the
midst of her KBC hangover.
“Such questions will not change anyone’s life,” the buffalo was his usual self.
“C’mon, be serious,” she wanted an answer.
“Actually, it’s the answers you give that change lives,” that’s as serious as he
could get.
“Exactly, Birla Sun Life Tax Relief ’96 is the ‘one size fits all’ answer to all your
tax questions,” she squeaked.
“This must be true as many people seem to believe that. More than Rs 130 crore
has poured into your fund in December alone,” the buffalo faked a surprise look.
“Didn’t I tell you? Be wise and put your money in BSLTR ’96,” said the bird. “After
all, the scheme was a topper on the return charts in ’06.”
“Magnum Tax Gain gave a tad better than BSLTR ’96. But are good one-year
returns the only reason the corpus has zoomed from Rs 60 crore to Rs 195 crore in
31 days?” he was going for the jugular now. “Is the buzz about dividend
announcements whipping up all the interest?”
“Whether some questions change lives or not, they really change a person’s
mood for the worse,” said a visibly upset bird and flew away.
BUFFALO BANTER
Tax planning fund managers often get cryptic and philosophical when asked about
dividends and their relation to corpuses. But it is common knowledge that tax
planning schemes declare huge dividends in the months leading up to March. Funds
follow Sebi’s regulation of closing dividend record within five days of announcement
— in letter. But the story is different in spirit.
Distributors literally sell the scheme, saying that a good part of the money will be
returned to investors in the form of dividends. And this arrangement benefits all
parties involved — the taxpayer can get an exemption for the full amount invested,
though he gets back a considerable sum; distributors get their commissions upfront
and the scheme’s corpus gets a boost. This explains the sudden spurt of interest in
this ET Silver scheme.
The BSLTR ’96 scheme is an erstwhile fund of Alliance Mutual Fund which was
taken over by the Birlas. The Silver rating reflects the fund’s average performance
in the long term in terms of risk-adjusted returns. During the three-year period, the
scheme gave a return of 36.6% p.a. Though this was better than the returns given
by the fund’s benchmark BSE 200 (29.2% p.a.), it fell short of the average returns
given by the tax planning category at 41% p.a.
The fund had a very poor year in ’05. Its returns were among the worst in the
category. BSLTR ’96 gave just 31% returns during calendar ’05. This happened at a
time when the ELSS category was riding the bull run, giving an average return of
over 51% p.a. Magnum Tax Gain, the top-performing ELSS fund of ’05, generated
whopping returns of 96% p.a. as its mid-cap picks clicked well. BSLTR’s exposure in
pharma stocks was a real drag. Also, some of its long-term picks were flat during
the year, according to the fund manager.
Jayesh Gandhi, who took over the scheme amidst this chaos, managed a
remarkable turnaround in ’06. Pharma stocks were dropped — from a high of
around 17% of the portfolio in mid ’05, the sector now accounts for less than 2%.
Also, mid caps like Taj GVK Hotels & Resorts and ING Vysya did well for the fund.
These stocks almost doubled during the year. ICICI Bank (4%) and Reliance
Communications (3%) were outperformers in their sectors. Aditya Birla Nuvo was
another outperforming stock, said the fund manager.
As a result, the scheme has given a return of 42.7% over a one-year period. Only
Magnum Tax Gain has given better returns among tax planning schemes, at 44%,
during this period. BSLTR’s returns also beat the benchmark BSE 200, which gave a
return of 38.7% during this period.
Mr Gandhi handed over the baton to Ajay Garg in September ’06. Mr Garg has
been with the AMC for the past four years; he has come up the ranks and has
handled various responsibilities in trading and derivatives. He has been managing
the fund for only three months; hence, it’s too early to make a judgement on his
stock-picking skills.
This being the tax season, the scheme merits a consideration by investors. If the
high cash position of around 15% is any indication, investors may get the benefit of
a dividend payout. The returns have also begun to look up, which a dd to the fund’s
appeal.