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Home > Business > Special

All about HSBC Tax Saver Equity Fund

November 28, 2006

  • Type
  • Open-ended tax-saving
  • Benchmark
  • BSE 200
  • Min. Investment
  • Rs 500
  • Face Value
  • Rs 10
  • Entry Load
  • 2.25%*
  • Exit Load
  • Nil
  • Issue Opens
  • November 20, 2006
  • Issue Closes
  • December 15, 2006
    * Nil for investments of Rs 50 m (5 crores) and above.

     Investment Objective*

    To provide long term capital appreciation by investing in a diversified portfolio of equity & equity related instruments of companies across various sectors and industries, with no capitalisation bias. The Fund may also invest in fixed income securities.
    *Source: Offer document

     Is this fund for you?

    At least in the Indian context, timing usually plays a role in the launch of mutual fund products. With a little over 4 months left before the tax-planning season draws to a close, it is not surprising to see several AMCs (Asset Management Companies) launch their tax-saving funds (also referred to as Equity-linked Saving Scheme/ELSS).

    HSBC Tax Saver Equity Fund (HTSF) is one among several tax-saving funds launched in the recent past. It is a diversified equity fund, which offers investors an opportunity for saving tax by providing Section 80C benefits.

    Under Section 80C of the Income Tax Act, a taxpayer is eligible for deduction of upto Rs 100,000 in a year from his gross total income, provided the money is invested in specified instruments like tax-saving funds, for instance.

    Tax-saving funds are particularly relevant for the risk-taking investor aiming to save tax. To begin with, it is the only equity-linked investment within the tax-planning gamut. ULIPs (unit-linked insurance plans) are also market-linked, but they have an insurance element. Tax-saving funds have a 3-Yr lock-in, which compels investors to take a long-term view on equity markets. At Personalfn, we maintain that investors must in any case consider equity-linked investment with a minimum 3-Yr investment time frame. To that end, tax-saving funds are right up their alley. Another positive with tax-saving funds is that even the fund manager can practice long-term investing by taking investment decisions that will benefit investors over the long-term.

    Our view on HSBC Mutual Fund is that it's a process-driven fund house. There is relatively lower reliance on individuals, which is why the churn in its fund management team hasn't impacted its investment processes. Over the years, the performance of HSBC Equity Fund (a predominantly large cap) has caught our eye for its consistency.

    However, it's still early days for the fund house; take away HSBC Equity Fund (launched in December 10, 2002) and there is little of note the fund house has achieved, at least on the equity side. Apart from HSBC Equity Fund, none of its funds have completed 3 years of existence, so it may be a little premature to comment on their performances. Add to this the fact that the last 3 years have seen a secular rise in equity markets, which has made it even more challenging to form an objective view on fund management processes as opposed to fund's performance. At Personalfn, we like to see an equity fund backed by credible sponsors and well-defined investment processes put in a consistent performance over 3-5 years over various market phases (particularly the downturns).

    To that end, we recommend that investors consider investing in tax-saving funds like HDFC TaxSaver and HDFC Long Term Advantage, which have a proven track record over the long-term. Meanwhile, they can track the performance of HTSF over a 3-5 year period and take a revised view on investing in the fund accordingly.

     Portfolio Strategy

    HTSF is mandated to invest between 80%-100% of its assets in equities and equity-related instruments. It can also invest upto 20% of its assets in debt and money market instruments.

    InstrumentsAllocation Range
    Equities and equity related securities80%-100%
    Debt, money market instruments and cash0%-20%

    The fund proposes to invest in stocks from across market capitalisations i.e. it will invest in a mix of small, mid and large cap stocks across sectors to attain its stated objective of capital appreciation.

     Fund Manager Profile

    Mr. Mihir Vora, is Senior Vice President and Head of Fund Management-Equities. He is a CFA, B.E. (Mechanical) and also holds a Post Graduate Diploma in Management. Before joining HSBC Asset Management (India) Private Limited in July 2006, he was associated with ABN AMRO Asset Management Company Limited as Head-Equities.


    Theoretically, HTSF is well placed to benefit from its investment mandate of investing across market capitalisations and sectors. Also, as mentioned earlier, the lock-in period of 3-Yr will help the fund manager take a long-term view on his investments without worrying about redemptions. Moreover, the flexibility to invest in debt/money market instruments should see the fund tide over market turbulence relatively well.

    For a Free download of the latest issue of Money Simplified � The 2007 Guide to Tax Planning, Click here!

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