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This top-performing tax-planning equity fund of 2003 is riding the equity market at full speed. Birla Equity Plan could be a hugely rewarding fund for investors who can invest and forget for three years.

After making a shaky start when the technology rally came to an end, Birla Equity Plan has made a strong comeback. A higher exposure to mid-caps and some smart stock selection has helped it deliver top-notch returns recently. It was the top-performing fund in the category last year. Though the returns have come with slightly higher volatility, the long-term nature of tax-break investment should smoothen out this volatility.

Launched in February 1999, Birla Equity Plan rode the tech rally with gusto. It gained nearly 250 per cent within a year of its launch but was unable to sustain it when techs crashed in 2000. The fund clung to its 50 per cent plus tech exposure through 2000, ending that year at the bottom of the category. In 2001, however, the fund toned down its tech allocation and went into defensives like pharma and FMCG. This helped it win back some of its losses, but kept it out of the post 9/11 recovery. In late 2001, tech and PSU energy stocks—which Birla Equity Plan lacked—gained the most. It thus ended a second year as an under-performer.

BEP's fortunes finally turned in in 2002, when it started leaning towards mid-caps. This coincided with the rally in mid-cap stocks. Moreover, the fund's timely foray into bank stocks like SBI, PNB and Corporation Bank helped it garner top-quartile returns in 2002 and 2003. Nearly one-fifth of the portfolio was invested in financial services stocks in 2003.

Apart from some good bank stock picks, the fund has also gained from tech holdings like E-Serve and I-Flex. Mid-cap ventures like GE Shipping, Ashok Leyland, Eicher, Divi's Lab and Jindal Steel & Power also proved fruitful in 2003. During the year, it had an average of 60 per cent in mid-caps. That apart, it has also held quality large-caps like Reliance Industries and National Aluminium, thus providing the needed stability to the mid-cap tilted portfolio.

All in all, Birla Equity Plan had maintained a well-diversified portfolio and the long-term performance is encouraging — total annualised return of 28 per cent in nearly five years. Apart from tax-benefit, a low initial investment requirement (Rs 500) and no entry and exit load further add to its charm. Birla Equity Plan could be a hugely rewarding fund for investors who can invest and forget for three years.