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A Bolt from the Blue

Even in falling markets, Taurus Libra Taxshield has yielded positive returns. Here's how


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This old article may have references to outdated tax rules and laws. For up-to-date information on taxation of mutual funds, refer to https://www.valueresearchonline.com/tax/

 

Its old news but the only one anyone has to report about the Indian stock markets. The markets are plunging, mutual funds are suffering, equity categories making it a habit of being in red and so on and so forth. But wait, there is some good news and it comes from the equity tax-planning category. Taurus Libra Taxshield is the fund in question - it has actually produced positive returns to the tune of 21 per cent (as on 24 July, 2008) in the past one year. And that too at a time when its category shed 11 per cent and the category's worst performing fund, ABN AMRO Tax Advantage Plan was down by as much as 26 per cent. The category's second best fund, Sundaram BNP Paribas Taxsaver also lagged behind with positive 2.07 per cent returns. In such a scenario, Taurus Libra Taxshield's performance surely comes as a bolt from the blue.

 

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Even more so because Taurus Libra Taxshield has not been a good performer in the past. It was a laggard in the category if we see the 3 year and 5 year returns of the fund. But it has come out of its shell when the markets are unfavourable. Its returns are 28 percentage points higher than the category average and 26 percentage points higher than its benchmark BSE 200. The fund stood ahead of the lot due to some smart moves and foresight. The fund manager was prompt enough to book profits in most of its holdings by the end of 2007, just before the market swayed downwards and by December 2007, the fund had 22 per cent of its corpus in cash. It smartly got into stocks of some great companies with a lowered price tag like 3i Infotech, Oriental Bank of Commerce and Bihar Tubes.

 

During the past one year, the fund was heavily invested in the Financial Services sector with an average allocation of 34 per cent to it. This was followed by Metals and Technology sector with average allocations of 12 per cent and 8 per cent respectively. Reliance Capital and Infrastructure Development Finance Co. were the most favoured stocks during this time frame. Since the beginning of 2008, the fund has diversified its portfolio by increasing its average portfolio size from 14 to 21. Its allocation to the top five holdings has also come down from 50 per cent to 40 per cent thus reducing the dependability on a few stocks.

 

The fund has emerged bright when the markets are throwing gloom all over. It has come out of the blue with propitious performance. But will it be sustained throughout the market downturn and even after that? Only time will tell.

 

This old article may have references to outdated tax rules and laws. For up-to-date information on taxation of mutual funds, refer to https://www.valueresearchonline.com/tax/

 
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