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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ICICI Prudential Tax Plan - A Consistent Performer

This is largely a mid-cap oriented fund, though currently half its portfolio of 54 stocks are large-cap stocks. The fund grabbed attention in 2009 by out performing the category by 30 percent, delivering 112 per cent returns. The fund benefited from allocation to pharma, but what propelled the out performance was the high exposure to mid- and small-cap stocks.

The fund has been a patchy performer since inception and has had some great runs as well. For instance it had a good run between 2003 and 2005. But by end 2006, the fund tanked, when it had less than 5 per cent exposure to large-cap stocks, at a time when large-caps were rising. Again, it failed in 2007 when its sector bets failed. The fund was holding 20 per cent in FMCG and healthcare while it remained underweight in metals and energy sectors, in which the respective indices delivered 121 per cent and 115 per cent. The oil and gas stocks were over valued at that time. It did lead to the fund's poor performance in 2007, but it also helped us later.

In 2008, the fund was able to curtail its fall to 56 per cent, by increasing exposure in large-caps. This, was however achieved without resorting to aggressive cash and debt calls. This also helped when markets rallied in 2009. The fund outperformed its peers in each of the four quarters of 2009. The fund restricts exposure to individual stocks at 5 per cent, with the exception to large-cap stocks such as Reliance Industries, Infosys Technologies, Bharti Airtel, and SBI.
 
The fund currently has 15 per cent exposure to financial services and energy sector and with this increase the fund is emerging into a flexi-cap fund from a pure mid- and small-cap fund. Today, large-caps account for half the fund's portfolio. And, though the fund may have periodic underperformances, investor should stay put for the long run to reap the rewards. After all, in the ten-year period ending November 30, 2010, this fund delivered an annualised return of 28 per cent against the 21 per cent delivered by the category.

Invest in ICICI Prudential Tax Plan Online or ICICI Prudential Tax Plan Application Form Below

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