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ELSS After DTC

After the DTC comes into effect, tax-saving funds will continue to remain, but as diversified funds…

I am investing in the SIPs of HDFC Tax Saver since May 2010 to save tax and profit. As there will be no tax benefit on this SIP once DTC comes into force, should I stop the SIP after March 2012 or start investing in HDFC Equity or HDFC Top 200? I also have Rs 1,000 investment each in HDFC Mid-cap Opportunity and Sundaram Select Midcap which I plan to continue for 15 years towards my retirement target of Rs 50 lakh. Should I continue investing in these funds or switch to other schemes?- N Tirkey

Fund Scheme  Category  Rating  3-yrs ret (%)  5- yrs ret (%)
HDFC Taxsaver Tax Planning **** 19.68 15.59
HDFC Equity Multi Cap ***** 22.39 19.64
HDFC Top 200 Large & Mid Cap ***** 19.24 19.25
HDFC Mid-cap Opportunity Mid & Small Cap **** 24.12 NA
Sundaram Select Midcap Regular Mid & Small Cap **** 20.6 17.39
Return as on July 27, 2011, Ranking as on June, 2011

You are right in observing that tax planning funds will no more qualify for deductions when DTC comes into effect from April 1, 2012. However, this category of fund will remain and will be like any other diversified equity fund. If you wish to divert your funds from HDFC Taxsaver once DTC comes into play to HDFC Equity or HDFC Top 200, you can do so as both are highly rated funds with a consistent performance history.
To achieve your retirement goal of accumulating Rs 50 lakh in 15 years, you need to invest Rs 2,380 in a portfolio earning at annualised 12 per cent or Rs 2,220 if the same portfolio earns 15 per cent. This should be possible with the funds that you have selected—HDFC Mid-cap Opportunity and Sundaram Select Midcap Regular. However, remember that both these funds are mid- and small-cap funds which are risky in comparison to large- or large- and mid-cap funds. Moreover, you will need to monitor the performance of these funds once a year to note its progress towards your retirement goal.



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