The HDFC Tax Saver Fund launched in March 1996 under the erstwhile Zurich India Mutual Fund umbrella of schemes, has a corpus of Rs 2,789 crore as of December. Investments in it are eligible for deduction (up to Rs1 lakh) under Section 80 C of the Income Tax Act. It should be noted however that according to the New Direct Tax Code, fresh investments made in ELSS may not be eligible for deduction under Section 80C after April 1, 2012.
The fund has remained in the top 30 percentile (Crisil Mutual Fund Rank 1 and Crisil Mutual Fund Rank 2) for seven consecutive quarters.
Performance
In absolute terms, an investment of Rs 1,000 in the fund at the time of its launch in March 1996 would have growth to Rs 17,940 as of February 9, 2011 vis-à-vis its peer set and benchmark (S&P CNX 500) which would have appreciated to Rs 9,057 and Rs 4,874 respectively during the same period.
The fund’s two-year return in terms of a compounded annual growth rate is 51 per cent vis-à-vis 39 per cent and 37 per cent by the peers and benchmark. Even on a one-year, three-year and five-year basis, the fund has been able to outperform both the peers and benchmark.
Risk
The fund has demonstrated its performance over the last five years with lower volatility vis-à-vis its peer set and benchmark index. The superior performance coupled with lower risk is an indicator of better risk-return rewards.
Diversified portfolio
The fund is highly diversified in its exposure per stock. The fund’s portfolio held an average 50 stocks in a three-year period. In industry concentration, it is highly concentrated amongst few sectors. The exposure to the top three sectors over three years amounts to nearly 44 per cent.
Investment style
HDFC Tax Saver Advantage Fund’s average equity exposure over the last three years is close to 94 per cent while cash and cash equivalents has been less than 5 per cent. The fund’s churning over the last one year has been amongst the lowest in the category.
Over the last three years, financial services have been the most preferred sector for the fund with an average exposure of around 22 percent over this period. The fund has been overweight in this sector vis-à-vis the benchmark. Pharmaceuticals and industrial manufacturing followed with an average exposure of 12 and ten percent respectively. The fund has also been overweight in both these sectors vis-à-vis the benchmark. The fund has been underweight in energy, metals and telecom over the last three years.
— Crisil Fund Services
