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Fund Pick: Tata Income Fund

Background
Tata Income Fund is an intermediate-term open-ended debt fund investing in fixed income securities. The fund can also invest a maximum of 10 per cent in equities. Launched in April 1997, the fund met with a good response and raised Rs 70 crore in the initial offer period. The fund had assured an annual income of 15 per cent under its regular income option for the first year and revised rates for subsequent years. No return was assured in the cumulative option. The fund in its regular income option has till date declared dividends of 15 per cent, 12.5 per cent and 5 per cent during 1997-98, 1998-99 and 1999-2000 respectively.

Performance
Tata Income Fund has reported strong growth weathering the changes effectively with an impressive 17.8 per cent annualised return in its cumulative option throughout the tenure. The fund has been less volatile than its peers and also its benchmark. The initial predominant investment in high yielding medium quality corporate paper and the decline in the interest rates in the third quarter of 1997 gave the fund steady gains. However, due to falling interest rates, the fund not only suspended fresh sales till April 1998 but also decided against offering assured returns for the subsequent years as it became increasingly difficult to generate returns at the promised rate. This avoided the dilution in the portfolio return.

The interest rate hike in January 1998 had resulted in only a brief retreat by the fund. From the quality perspective, the fund is a mixed bag with AAA, AA and A rated papers accounting for 44 per cent, 32 per cent and 12 per cent respectively. The portfolio of the fund is spread over 50 securities of which the top 10 holdings account for 45 per cent of net assets. Unlike peers, the fund is fully invested in corporate debt without any allocation to gilt.

Outlook

Tata Income is suited for fixed-return investors seeking above average return from debt with marginal risk. The fund will charges an exit load of 1 per cent for exits within three months from February 1, 2000.

FUND BASICS
Objective	Size	NAV:31/1/2000	Exit Price	Entry Price	Tot Ret
Income	153 cr	14.79	14.79	14.79	18%
BENCHMARK  COMPARISONS (%)					30/12/99
	1M	3M	6M	1Yr	3Yr
Fund	1.1	3.9	7.4	16.0	N.A.
I-Bex Tot.	1.7	4.3	8.3	16.4	N.A.
I-Bex Prin.	0.8	1.4	2.5	4.1	N.A.
Obj. Avg.	-	3.4	-	13.2	N.A.
Top Holdings (31/12/99)			Mkt.Val(cr.)		Net Asts (%)
IDBI			19.13		12.66
Reliance Industries 2004			10.87		7.19
Sandvik Asia			10.36		6.86
Reliance Petroleum			7.04		4.66
G E Capital Services			6.99		4.63
ICICI			5.43		3.59
Mahindra & Mahindra			5.07		3.36
Madras Cements			3.51		2.32

Mutual Funds

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