HDFC TAX SAVER (OLD WAR HOUSE)

An exemplary track record and a highly reliable fund house make HDFC Taxsaver one of the best in its category. But when a new manager came at its helm, all was not so honky dory for the fund

This fund has a knack for making the competition look silly.

Its rating has never gone below four stars in its rating history of 100 months. Since November 2004, it has steadfastly held on to a five-star rating. Known for its astute stock picking and stellar performance, it has also shown resilience while protecting the downside time and again.

But despite being a compelling tax-saving option, it has stumbled a bit lately. Vinay Kulkarni took over from Dhawal Mehta in November 2006. The timing could not have been worse.

The market dipped in the first quarter of 2007 and the new fund manager had the task of living up to his predecessor's astuteness and investors' expectations. During this time period, the fund dropped to the last quartile of the category, losing 8.62 per cent vis-à-vis an average peer's loss of 6.45 per cent.

Once at the helm, Kulkarni made a couple of visible changes to the portfolio. Exposure to auto and construction stocks was significantly lowered while notable positions were built in sectors like energy, banking and services. The increased investment in Reliance Industries and banking stocks proved rewarding but the higher allocation to technology has dented performance.

Though held in high regard, as far as the category of tax-planning funds is concerned, the fund is not completely out of the woods. But going by its great performance history and the reliability of the fund house, this fund remains a keeper despite its recent setback. Just be more watchful over the coming months.

(by value research)