The Hindu Business Line : HDFC Taxsaver: Invest

HDFC Tax Saver is a good investment candidate for investors seeking a tax-saving option, based on its three- and five-year performance records. In both periods, it outpaced its benchmark CNX-500 by a good margin. However, despite being invested in large-cap stocks, sector preferences seem to have contributed to slower performance over the past year. Its consistent performance over a longer time-frame makes it a good choice among the tax-planning funds.

Higher volatility in the stock market appears to have prompted many tax-saving funds, including HDFC Tax-Saver, to shift their portfolios from a predominantly mid- and small-cap tilt to a large-cap orientation. In its latest portfolio, close to 85 per cent of the assets were invested in the stocks with a market capitalisation above Rs 5,000 crore.

The fund has generated a return of 38 per cent on a compounded annualised basis since its inception. During the same period, an investment through SIP could have fetched investors returns that were 5 percentage points higher than the lump-sum investment. Investors can route their investments through the systematic investment plan to take advantage of cost averaging.

Performance: HDFC Tax Saver’s NAV has grown 25 per cent over the past year, trailing the benchmark by 13 percentage points. During the same period, Magnum Tax Gain returned 50 per cent return. Exposure to software, auto ancillaries and consumer non-durables could explain the performance of the fund over the year. In the past two years, the fund has trailed the benchmark on a rolling return basis about 60 per cent of time.

Portfolio Overview: HDFC Tax Saver has 40 stocks in its latest portfolio and the top 10 stocks account for 45 per cent. Over the past six months, stepped up the exposure to capital goods, which accounts for a quarter of the assets in the August portfolio.

Underperforming sectors such as software, auto ancillaries and consumer non-durables together account for 25 per cent of the latest portfolio. A positive aspect of the fund is its stock selection. The performance could improve when these sectors deliver better performance.

Fund facts: HDFC Tax Saver was launched in December 1995 and the fund is managed by Mr Vinay Kulkarni. An Investment into the fund will eligible for tax benefit up to Rs 1 lakh. The NAV per unit is Rs 171.

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