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Risky, But Rewarding

The charm of this fund lies in its ability to generate trail-blazing returns. But it won't go down well with investors who are looking for stability over flashy returns

Prudential ICICI Tax Plan continues to be a high-return high-risk game for investors. It may not go down well with investors who are looking for stability over flashy returns. Its concentration in small and mid cap stocks is a testimony to this fact. Mid caps and small caps occupy humungous space in its portfolio, at 42 and 51 per cent, respectively. Large cap companies have a small presence in its portfolio (5.58 per cent in December 2006).

The fund is no doubt aggressive but it has been able to justify its strategy through good returns. The fund is not only aggressive in selecting stocks but also churns its portfolio very vociferously. It has restricted its portfolio to around 50 stocks. The fund manager loves to try out stocks but the buy-and-hold strategy does not seem to be his priority.

It paid the price for being too aggressive when the markets went down. After the May crash, the fund had lost heavily. In the June quarter, the fund had lost 15.75 per cent, slightly more than the category's loss of 15.35 per cent. Since then, the going has been a little tough. During the six month period ending January 11, 2007, the fund has delivered 28.65 per cent to under-perform the category's 30.20 per cent returns.

Healthcare sector remains the top holding of the fund followed by chemicals, diversified and FMCG. The technology sector occupies a paltry 3 per cent allocation.

Cadila Healthcare is currently its top holding with an over 5 per cent allocation (as per December 2006 portfolio). Sundaram-Clayton (4.84 per cent), Kesoram Industries (4.76 per cent) and Trent (4.10 per cent) are the other major holdings.