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

Investors can buy the units of Sundaram BNP Paribas Tax Saver (Sundaram Tax) considering its long-term track record in delivering impressive returns and ability to contain downsides.

The fund has managed to better the returns of its benchmark-the BSE 200, over one-,three- and five-year periods. In the tax-planning category this has the best record over a five-year period with an annual return of 22.9 per cent.

During the market upsides, the fund has managed to better its benchmark and most peers by a comfortable margin. But during periods of market volatility over the last couple of years, it has managed to contain downside reasonably.

For investors looking for tax-planning funds with a good track record, this fund may be in top reckoning.

Performance and strategy

The fund has, over long time periods, bettered its benchmark as well as peers’ such as HDFC Tax Saver and Principal Tax Saver. The returns delivered by Sundaram Tax during periods of market upswing are comparable to the best performing open-ended diversified funds.

During periods of market upswings, such as those in 2006 and 2007, the fund has managed to outperform its benchmark by a substantial margin. In the market correction in early 2007 and the protracted correction this year, Sundaram Tax has managed to contain downsides better than all tax-planning funds.

The fund has a multi-cap approach and had invested over 35 per cent of its portfolio in mid-cap stocks (less than Rs 7,000 crore market capitalisation) last year, which explains its out-performance. However, with broader markets and mid-caps suffering a steep fall, the fund has moved to predominantly large-cap stocks.

The other key strategy that the fund has adopted is to move substantially into cash. From being nearly fully invested late last year, the fund’s November portfolio indicates that nearly 36.5 per cent of the portfolio is held in cash.

Together these may explain the downside containment that the fund has managed this year.

Portfolio moves

The fund has continued to remain bullish on the financial services and energy sectors, with the two remaining top sectors held over the past year. The fund has also high exposures to defensive sectors, those that fall less during market volatility, such as consumer non-durables, pharmaceuticals and telecom services.

The fund also sports a more compact look with the number of stocks coming down from 56 in November 2007 to 27 currently.

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