The Hindu Business Line : Sundaram BNP Paribas Tax Saver: Invest

An investment can be considered in Sundaram BNP Paribas Tax Saver (STS) fund. The fund's three-year return of 53 per cent is better than those delivered by some proven diversified large-cap funds, placing it among the top five tax-saving funds.

Several tax-saving funds have a distinct tilt towards mid-cap stocks, which helped performance during 2004 and the first half of 2005. STS was no exception. The recent upheaval among the mid-caps has hit the performance of several tax-saving funds and there now appears to be a trend of increasing exposure to large-cap stocks. STS now proposes to restructure the portfolio with a bias towards large-caps. This may make it less aggressive and more suitable for investors with a moderate risk appetite.

An investment in tax-saving funds up to Rs 1 lakh qualifies for tax benefit under Section 80C and has a three-year lock-in period. Normally, when market sentiment is at a low, a lumpsum investment may be made to maximise returns. However, in a volatile market, routing funds through a systematic investment plan would be more appropriate, as it minimises the risk of timing the market.

Performance: STS' one-year return of 32 per cent is better than the HDFC Tax Saver and Magnum Tax Gain, which delivered returns of 28.5 per cent and 30.5 per cent respectively. The fund trails its benchmark, the BSE-200, by 4 percentage points; this happened in seven out of 12 months the past year. However, the fund outpaced its benchmark by 15 percentage points over a three-year period.

Several tax-saving funds that generated returns over 100 per cent till the early part of year shed their gains during the correction in May, because of the presence of mid-caps in the portfolio. Sundaram Tax Saver, which held 73 per cent of assets in stocks with a market capitalisation of less than Rs 5000 crore over the past year, has drastically reduced this set to 48 per cent.

Portfolio Overview: STS has about 65 stocks in its portfolio and single-stock exposure is restricted to 4 per cent. The top ten stocks accounted for 28.5 per cent of assets. The consumer goods sector corners the highest allocation. As the market underwent a correction, exposure to industrial manufacturing was reduced gradually.

Like other diversified funds, STS enhanced exposure to software stocks in the last quarter. The fund churns its portfolio regularly. Taj GVK Hotels, Hotel Leela Venture and Procter & Gamble are a few stocks that have remained in the portfolio over the past year.

Fund facts: The fund was launched in November 1999 and is managed by Mr Anoop Bhaskar. It has an asset base of Rs 61.4 crore and charges an entry load of 2.25 per cent. The minimum investment is Rs 500.

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