The Hindu Business Line : Tata Tax Saving Fund: Hold

INVESTORS in Tata Tax Saving Fund can retain their holdings. The fund's five-year track record has improved, thanks to a strong showing in the bullish phase that began in mid-2003. Tata Tax Saving's performance over the past year, in particular, has been impressive. Over this period, it has delivered a 100 per cent return, outpacing the returns of most tax-saving funds.

A recent ranking of equity mutual funds places Tata Tax Saving in the top 10 on the basis of performance over a five-year period. Despite its relatively good track record, the fund need not figure in the preferred pick for an investor seeking exposure to equity tax-saving funds.

Tata Tax saving follows an aggressive investment strategy. A focus on mid-caps, frequent churning of its portfolio and exposures to select momentum picks appears to explain this outperformance. PruICICI Tax Plan, however, appears to have compensated investors better for the risk over a five-year period, though it also with a higher risk profile,.

In the light of its recent strong performance, Tata Tax Saving can continue to remain as a small part of your portfolio.

Investors with a risk appetite who wish to invest in tax-saving funds could consider HDFC TaxSaver, Magnum TaxGain, PruICICI Tax Plan and HDFC Long Term Advantage, while others of a more conservative bent could consider Franklin India Taxshield and Birla Equity Plan.

Performance: The fund has outperformed the Sensex in each of the past five years. Against tougher benchmarks such as the BSE-500, which captures a broader basket of stocks, too, it has acquitted itself well, outperforming the fund in four of the last five years.

Like other tax-saving funds, Tata Tax Saving enjoys the advantages of a small asset base and stable fund flows when compared to typical diversified funds. Its focus on mid-cap stocks has also revved performance.

Portfolio overview: The fund is invested in 33 stocks, with exposures to any single stock restricted to less than five per cent.

A majority of the portfolio is invested in stocks with a market capitalisation of less than Rs 2,000 crore. Momentum picks such as South East Asia Marine Engineering, Sanjivani Paranteral and Samtel Colour also figure in the portfolio.

The fund takes measured exposures to sectors. The top three sectors — pharmaceuticals, textiles and engineering — account for about 25 per cent of the total assets.

Fund facts: The fund was launched in 1995. It has an asset base of less than Rs 70 crore. Investments of up to Rs 1 lakh in the fund are eligible for tax benefits under Sec 80C. The minimum investment amount is Rs 500.

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Tata Tax Saving Fund: Hold