In just one year, Magnum Taxgain climbed up the Value Research rating ladder to become a four-star fund - a remarkable feat if we consider that the fund was rated just two stars in March '05. Huge inflows followed the strong performance - the fund's assets rose nearly nine-fold in last one year.
Magnum Taxgain has been one of the greatest beneficiaries of the ongoing bull run. In fact, it's this bull run that helped the fund regain its lost glory. Year 2003 changed everything when things started looking up for this fund. Under the able guidance of Sandip Sabharwal (not with the fund house anymore), the fund started to blossom in 2003 and since then, it has produced some exceptional returns. In the three-year period ended April 5, 2006, its 114.19 per cent annualised return has been well above the 98.02 per cent gain of the second best in the category, and a lot more than 72.48 per cent return of an average peer. That's the charm here - Magnum Taxgain comprehensively beat the opponents.
Having said that, we feel one should be ready to take some risk and stomach bumpy rides on way to earn huge returns. Stress on mid- and small-cap stocks is bound to increase the volatility here. But the fund management has displayed a knack of picking up winners, time and again. Stocks like Thermax, Praj Industries, Havell's India, Crompton Greaves, United Phosphorous etc have proved to be multi-baggers.
The biggest concern here is the absence of Sabharwal and three manager changes since he left the fund house in November last year. The positive is the marked improvement in the performance of all Magnum funds, which hints at a sound thought process that's behind this fund as well. In the post-Sabharwal era, while the fund continues to do well, the fund management has brought in some crucial changes. Large-cap stocks have started to come back in the portfolio and diversity has increased. Exposure to individual stocks too have been cut substantially - today the top five holdings consume only 16.37 per cent of the fund's assets, substantially lower than 27.24 per cent under Sabharwal in October last year. These steps sound logical and may help the fund keep a check on the losses if something unfortunate happens in this sort of a 'heated' stock market.