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Fund Pick: Alliance Capital Tax Relief '96

Background

A lliance Capital Tax Relief '96, tax saving equity fund is almost fully invested in equities. It was launched in December 1995 as a closed-end scheme and was converted into an open-end fund in July 1999. The fund is available to the investors at an entry load of 1%.

Performance

The fund has been a blockbuster with a total annualised return of 69% since its launch. With Alliance Tax Relief's NAV at Rs 69.14, an initial investor's money has grown almost 600% absolute gain in less than four years. The fund's growth looks all the more astounding as the fund was launched when the market was in a strong bear grip, which prevailed till 1998. The fund has been able to provide this return on a small asset base by pursuing an aggressive strategy and with concentrated bet on few stocks. Till 1998, the fund was largely into select software and FMCG stocks. In its three and half-years tenure, the fund posted was down in four quarters with negative returns and under-performed the benchmark in only two quarters. The fund handsomely outperformed against benchmarks and its peers.

The fund given its small size changes its portfolio complexion often radically. During the past quarter ending September 1999, the fund diversified its portfolio - increasing its exposure to Telecom, Auto, Chemical stocks and reduced its exposure in FMCG by 15% to 9.4% and Media stocks by 12.2% to NIL. The fund has increased its positions in infotech stocks from 9.5% to 29.6% and in pharmaceutical stocks from 4% to 13.2%. Following its aggressive portfolio strategy, Alliance Capital Tax Relief has more than adequately rewarded for the volatility over the past four years. In the past quarter the fund has gained 49% outperforming the BSE 200 by 24%. After a lock-in of three years of which ended in March 1999, the fund is getting smaller in size with outflows.

Outlook

The fund has successfully been able to ride the momentum in select stocks with a high turnover. However, if the fund is caught on the wrong foot, nasty surprises cannot be ruled out. The fund has the potential to give significant returns despite the already ruling high NAV. The fund could prove highly rewarding investment with a tax break of 20% rebate with a 3-year lock-in and 1% entry load.

FUND BASICS
Objective	Size	NAV:26/11/99	Exit Price	Entry Price	Total Returns
Growth	4.75 Cr	62.17	62.17	62.79	62% pa
BENCHMARK COMPARISONS (%)					29/10/99
	1M	3M	6M	1Yr	3Yr
Fund	-2.9	26.6	63.1	142.0	76.4
Sensex	-6.7	-2.2	33.6	58.0	12.0
Nat. Index	-2.5	8.6	48.9	71.2	15.3
Obj. Avg.	-0.7	14.5	46.3	69.0	11.7
TOP HOLDINGS EQUITY (30/09/99)			Value (Cr)		% of Assets
Infosys Technologies			0.39		9.69
Citicorp Securities & Inv.			0.29		7.21
NIIT			0.28		6.96
Global Tele-Systems			0.28		6.96
Cipla			0.24		5.97
H D F C Bank			0.20		4.97
Himachal Futuristic			0.20		4.97
Digital Equipment (India)			0.19		4.72
Indian Shaving Products			0.17		4.23
Dr. Reddy'S Laboratories			0.15		3.73
Pfizer			0.15		3.73
B F L Software			0.13		3.23
Vesuvius India			0.13		3.23
Archies Greetings			0.13		3.23
Ashok Leyland			0.12		2.98
Satyam Computer Services			0.11		2.73
Larsen & Toubro			0.09		2.24
Excel Industries			0.09		2.24
National Radio & Electronics Co.			0.08		1.99
Godfrey Phillips India			0.08		1.99

Mutual Funds

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