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Aarati Krishnan

SINCE its launch in January 2001, HDFC Tax Plan has delivered a handsome out-performance of the Nifty index, with annualised returns of around 27 per cent. Initial investors in the scheme are still under their lock-in period. They may hold on to their investments.

Fresh investments in the fund may be avoided for now, given the sharp run-up in broad market levels over the past few months. Fresh investments carry a three-year lock-in period, yet another reason to maintain a cautious stance while considering investments in the fund.

The fund's portfolio is actively, even aggressively managed with a strong bias towards mid-cap stocks. Between March 31 2003 and June 30 2003, the fund has been on a buying binge, adding to existing positions in a host of stocks. The fund made the following changes during the period:

Stocks added: Most of the new additions were mid-caps. Oriental Bank of Commerce, Paper Products, Carborundum Universal, Maharashtra Seamless, Tata Telecom and Shree Cement were the new additions to the portfolio.

Stocks sold: Holdings were liquidated in Ucal Fuel Systems, Syndicate Bank, Britannia and Pidilite during the period.

Exposures enhanced: The fund added to existing positions in Goodlass Nerolac, Alfa Laval, Vesuvius, Blue Star, Mico, Sundaram Fasteners, SBI, ITC, Siemens, Hindustan Lever and Heritage Foods.

Exposures pared: The fund partially booked profits in Union Bank of India during the period.

Sectoral shifts: The portfolio continued to be very diversified. Industrial machinery was the largest sectoral exposure at 16.1 per cent of the portfolio. Commodity chemicals at 10.1 per cent and banks at 9.8 per cent were the other big exposures.

The fund appears to have invested a substantial portion of the fresh inflows received in the previous quarter in the period from March 2003 to June 2003, with the cash position falling from 27 per cent to 14 per cent of the net assets.

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