A long-term bet

FUND PICK/BIRLA EQUITY PLAN

Background: Birla Equity Plan was launched in February 1999. Investment of upto Rs 10,000 annually entails a tax rebate under Section 88 and carries a three-year lock-in period. The fund does not charge any entry or exit load.

Performance: After making a shaky start when the technology rally came to an end, Birla Equity Plan has made a strong comeback. A higher exposure to mid-caps and smart stock selection have helped it deliver top-notch returns recently.

It gained 161 per cent in 2003, becoming the hottest fund of the year. The fund's long-term record is also compelling - with a three-year return of 31 per cent, it ranks among the top-quartile funds in its category.

Though returns have come with slightly higher volatility, the long-term nature of tax-break investment should smoothen out the volatility.

Portfolio: The fund rode the tech rally with gusto soon after its launch in early 1999. It gained nearly 250 per cent within a year but was unable to sustain its performance when techs crashed in 2000.

The fund clung to its 50 per cent plus tech exposure through 2000, ending that year at the bottom of the category.

In 2001, however, it toned down its tech allocation and went into defensive sectors like pharma and FMCG. This helped the fund win back some of its losses, but kept it out of the post-9/11 recovery.

In late 2001, tech and PSU energy stocks - which the fund lacked - gained the most. It, thus, ended its second year, too, as an underperformer.

The fund's fortunes finally turned in 2002 when it started leaning towards mid-caps. This coincided with the rally in mid-cap stocks.

Moreover, the fund's timely foray into bank stocks like SBI, PNB and Corporation Bank helped it garner top-quartile returns in 2002 and 2003. Nearly one-fifth of its portfolio was invested in financial services stocks in 2003.

Apart from some good bank stock picks, the fund has also gained from tech holdings like e-Serve and i-flex solutions.

Mid-cap ventures like GE Shipping, Ashok Leyland, Eicher, Divi's Labs and Jindal Steel and Power also proved fruitful in 2003. During the year, it had an average of 60 per cent in mid-caps.

Outlook: The fund has maintained a well-diversified portfolio and its long-term performance is encouraging - total annualised return of 30 per cent in nearly five years.