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Birla Equity Plan

Investors in this aggressive fund have only seen the value reach sky high and then fall. But for its quality orientation, it could be hugely rewarding to those who invest and forget for three years.

Birla Equity Plan (erstwhile Birla Tax Plan), a young, small and aggressive equity fund has shown a dramatic rise and fall. Through 1999, since its launch in February, its NAV zoomed to Rs. 27.67, a 176 per cent gain. But has lost ground sharply -- 41 percent in 2000 and another 25 percent in 2001. The huge initial gain and a 30 percent rise from its trough in September 2001 have kept the fund above water – 12.15 percent since launch.

Investment of Rs. 10,000 annually entails a tax rebate under section 88 but carries a 3-years lock-in period. It helps it focus on long-term performance and take upheavals in stride. But till now investors in the fund have only seen the value reach sky high and fall, without an opportunity to cash out.

This management bets big. In 1999 it was heavily in technology stocks and now in pharmaceutical. To start with, the fund was selectively into the then top market flavours – technology and healthcare stocks. With its big gain in short-time span, investor's lavishly poured money in the 2000 tax season, which coincided with the peak of technology boom. A die-hard tech believer, it heavily tilted to technology stocks losing its diversity. Technology stocks accounted for an average 53 percent of the fund assets in 2000. And with tech slide, it lost twice as much than its peers and benchmark.

In 2001, it changed its focus to select cyclical, pharmaceutical and FMCG stocks. Today, the fund is better diversified across sectors but still chases special situations with sizable position in Hero Honda, Hindustan Petroleum and Bharat Petroleum and marginal position in technology. The top three sectors still account for 60 percent of the fund. But it's making it work again. It's up 16.70 percent in 2002 through March 18, 2002.

For its quality orientation, this could be a hugely rewarding fund for investors who can invest and forget for three years.