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Shanthi Venkataraman

INVESTMENTS can be considered in Sundaram Tax Saver. The fund's performance has been impressive over the past year. In light of the sharp rally in the market in recent weeks, investments can be made in phases through a systematic investment plan, to protect against any downside risks.

Suitability: The fund is suitable for investors with a moderate risk appetite. It has a diversified portfolio, with holdings in any single stock not exceeding five per cent. This reduces the vulnerability of the portfolio to sharp movements in any single stock.

It also limits the upside that could accrue to the fund in the event of any one of its top holdings performing exceptionally well in the market. It does, however, tend to take concentrated exposures to sectors, from time to time. The fund also has a bias towards mid-cap stocks.

Performance: Launched at the peak of the 1999 rally, the fund's performance suffered a mild setback in its initial years. As a result, its five-year track record may not be as impressive as that of other tax-saving funds such as HDFC TaxSaver. But its performance has improved significantly since then, with returns over a one-year and three-year period in line with that of other top-performing tax saving funds.

Over the past year, the fund has generated a return of about 70 per cent (assuming re-investment of dividends); this compares well with others in its category. A well-timed entry into sugar stocks, some of whose prices appreciated multi-fold, appears to have paid off handsomely.

Portfolio overview: The fund has about 35 stocks in its portfolio, which is a large number, given its small asset base of about Rs 10 crore. This increases the number of active calls the fund manger has to make. The small asset base is, however, relatively more amenable for active churning.

Sugar, engineering and chemical sectors make up the top three holdings of the fund and constitute about 40 per cent of the total assets. There is a bias toward cyclical sectors. Stocks such as Sesa Goa, Taj GVK, Bajaj Hindusthan and Balrampur Chini figured quite early in the fund's portfolio and have delivered spectacular returns over the past year.

: The fund was launched in 1999. Investments in the fund are subject to a three-year lock-in and are eligible for tax benefits under Section 88 of the IT Act. The minimum investment amount is Rs 500. The fund manager is Mr Anoop Bhaskar.

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