ICICI Prudential Tax Plan

In its history of around 11 years, the fund has delivered mixed performances. The allocation to mid and small caps led to some exceptionally good years, but was also hit harder during the market downturns. In 2009, it grabbed the top slot with a return of 112 per cent.


The lock-in period of 3 years gives the fund manager the flexibility to make strategic, long-term investments. The portfolio is a mix of large and medium sized stocks chosen after intensive fundamental analysis and research.


This fund is not a large cap one though there will be periods when such stocks dominate. Launched in August 1999, it started off with a large-cap heavy portfolio but soon changed market-cap complexion. This helped the fund deliver exceptionally well from 2003 to 2005.

By 2006 end, the fund held less than 5 per cent in large caps which led to its underperformance. In 2007, its sector moves worked against it. With around a fifth of its portfolio in FMCG and Healthcare, it remained underweight in Metals and Energy. This was because the fund manager was of the opinion that stocks in the Oil & Gas sector were over valued while that of FMCG and Pharma were undervalued. But when the downfall took place in 2008, the fund’s fall of -56 per cent was around the category average. The sector bets and increased exposure to large caps helped (the cash and debt exposure averaged around just 6%). So when the market began to rally in 2009, the fund was in a good position to hop on to it. Exposure to Pharma and the high exposure to mid and small caps led to its fabulous performance.

Portfolio

The portfolio is well diversified across 65 stocks with the top 5 accounting for 22 per cent of the portfolio. This diversification is to balance the strong mid and small-cap tilt. The fund manager restricts the individual sector allocation to 20 per cent and does not exceed 5 per cent for individual stock holdings, barring a few large cap names. When market valuations expand, he tends to increase the number of holdings.

The top three sectors accounting for around 45 per cent of the portfolio is in line with the category average.


Though half the portfolio is currently in large caps and the portfolio is very well diversified, aggressive mid- and small-cap bets also take place. This gives it a risky bent and the fund could get hit harder during the market downturns.

ICICI Prudential Tax Plan's allocation to mid- & small-caps has led to both good & bad performances…

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