The Hindu Business Line : HDFC TaxSaver: Invest

Consistent performance and a sound track record of protecting the NAV with marginal damage in a bear market makes the fund an ideal candidate for any equity portfolio. Its performance in the recent bull-run has further strengthened the fund's reputation.

HDFC TaxSaver is an equity-linked savings scheme (ELSS) with a lock-in period of three years.

Investment can be made through a systematic investment plan (SIP) over a 12-month period.

This will enable investors to spread their entry points and capitalise on any weak market phases. Investment in the fund over the past year through an SIP route would have yielded 83 per cent annualised returns as against the 43 per cent returned by the benchmark index S&P CNX 500.

HDFC TaxSaver has a concentrated portfolio in terms of number of stocks held. The top ten holdings account for 54 per cent of the fund's net assets. The fund's penchant for holding rewarding mid- and small-cap stocks has yielded impressive returns. This strategy has recently undergone a slight change to suit the current market volatility.

The top five stocks in the fund's portfolio now come from the basket of the Sensex. This allocation pattern is likely to offset the risks arising from holding a concentrated portfolio, as large-cap stocks are more suited to weather a volatile market.

The fund continues to have a good number of mid-cap picks in its portfolio although the exposure to individual stocks in the space in not more than 5 per cent.

This is likely to benefit the fund from any fresh action in the mid-cap space. SRF and Balkrishna Industries are a few of the choice picks.

The fund appears to follow a focused approach for sector allocation as well. It holds 55-60 per cent of its corpus in the top five sectors at all times.

Such a concentrated portfolio makes the fund a riskier option compared to peers such as PruICICI Tax Plan, which has about 44 per cent in the top five sectors.

Performance: HDFC TaxSaver has returned about 87 per cent over the last one year and has trailed only Magnum Tax Gain. Its performance since launch has, however, turned out to be superior to other tax-saving funds.

The fund's success in maintaining consistency over bear markets is also a positive.

HDFC TaxSaver qualifies for deduction under section 80C of the Income Tax Act. Being an open-ended fund the recent clarifications by the Income-Tax Department on close-ended ELSS funds will not affect the deductions available for the scheme.

Fund facts: HDFC TaxSaver was launched in 1996. Mr Dhawal Mehta manages the fund, which has an asset base of Rs 183 crore. NAV under the growth option is Rs 112.

The minimum investment amount is Rs 500. The fund has an entry load of 2.25 per cent. There is no exit load.

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