Sundaram Tax Saver: Hold

Recommendation: Hold

Aarati Krishnan

IN THE two years since its launch, Sundaram Tax Saver has outperformed the BSE Sensitive Index, though outpaced by a few of its peers. Initial investors in the fund, who may not have completed their three year lock-in period, may stay invested. Given its relatively short track record, fresh investments in the scheme may be avoided now.

The portfolio strategy lays stress on stock-specific diversification. That is, exposure to individual stocks is subject to a rigid ceiling, with no single holding allowed to make up more than 5 per cent of the net assets. While this makes the fund less vulnerable to changes in the fortunes of individual stocks, it also has a flip side. Due to the large number of constituents, the fund has to make several calls on its portfolio.

The fund made the following changes to its portfolio in November:

Stocks added: Sundram Fasteners, Reliance Petroleum, Wockhardt Pharma and TISCO were added. Each accounted for around 2 per cent of the net assets by end of the month.

Stocks sold: The fund completely sold out its holdings in Ranbaxy Labs, Knoll Pharma and Blue Dart Express.

Exposures enhanced: The fund added to a range of frontline IT holdings during the month. Stocks that saw additions were Infosys, Wipro, Satyam Computers and Digital GlobalSoft. Outisde of the IT sector, the fund bought more shares of SBI, Hindalco, and Hero Honda.

Exposures pared: The fund pared exposures in two FMCG stocks _ ITC and Dabur. It also pared exposures to quite a few cyclicals _ Reliance Industries, Ashok Leyland, Grasim and Larsen and Toubro.

Sectoral shifts: The IT sector saw the sharpest increase as a result of the above changes. IT accounted for 16.2 per cent of the net assets of the fund by end November, against 11.1 per cent the previous month. Exposure to consumer goods fell from 16.9 per cent to 13.8 per cent, while healthcare fell from 14.3 per cent to 11 per cent. The cash position barely changed, and was at 7.2 per cent by end of November.

Fund facts: Sundaram Tax Saver is an open-end tax-saving fund launched in November 1999. Investments in it are eligible for a tax rebate under Section 88 of the Income-Tax Act and carry the mandatory three-year lock-in period. The fund charges no entry or exit loads at present. It is managed by Anand Radhakrishnan.