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Shanthi Venkataraman

INVESTORS can stay with Tata Tax Savings Fund. The fund has turned in a reasonably good performance over one-year and three-year periods. The fund's performance over this period also compares favourably with other diversified equity funds, such as Franklin India Bluechip and HDFC Equity.

Its performance over a five-year period is, however, not as impressive as these funds, owing to a substantial setback suffered in the year 2000.

Suitability: Investments in this fund are eligible for tax rebate under Sections 88 and 112 of the Income-Tax Act. Investors can consider holding the fund as a means of diversifying their portfolio.

As a three-year lock-in period is required for tax saving plans, investors who wish to take fresh exposures to tax savings funds may consider funds such as HDFC Tax Saver ahead of this fund, in light of their superior long-term performance.

Performance: The fund turned in an impressive performance in 2003, with a return of more than 120 per cent. In the past year it has returned more than 50 per cent, which is in line with other top-performing diversified equity funds.

Its performance, however, trails that of HDFC Tax Plan 2000 and HDFC Tax Saver by a substantial margin in the last year.

Portfolio overview: The fund has a fairly diversified portfolio with exposures to any single stock not exceeding 8 per cent, while exposures to sectors do not exceed 10 per cent. The top three sectors account for about 30 per cent of the total assets.

The fund has, in the past couple of months, pared exposures to the pharma sector, which had a dominant presence in the fund's portfolio in 2003.

The fund also has significant cash holdings at about 15 per cent, which could slow down its performance.

The fund has a good number of mid-caps and small caps in its portfolio, however, which could help to pep up returns, although at higher risk.

Some of the prominent mid-caps in its portfolio are United Phosphorous, Crompton Greaves, Lupin, Divi's Labs, Bharat Forge and Jyoti Structures.

Fund facts: The fund was launched in 1996. The fund has an asset base of Rs 43 crore. The minimum investment amount is Rs 500.

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