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HDFC Taxsaver had always been held in high esteem in the tax-planning funds category. Not only has it generated superior returns but has also protected investors in a crashing market

HDFC Taxsaver continues to retain its top slot on the ratings ladder. Such has been the dominance of this fund that its star rating has never gone below four stars in its rating history.

The fund has always been held in high regard, as far as the category of tax-planning funds is concerned. Not only has it generated superior returns for its investors, but it has also shown resilience while protecting the downside time and again.

However, its image of being a wealth protector has taken a dent in the recent times. In fact, it has been in the thick of action over the past few months. Here is an update. The fund witnessed a change in the fund manager when Vinay Kulkarni took over from Dhawal Mehta in the last quarter of 2006. But the initial phase proved to be quite rough for the new manager, as the markets dipped in the first quarter of 2007, soon after he assumed charge. And 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. Certain changes are visible in the fund's portfolio. The new manager is reducing the level of concentration in the portfolio, as the number of holdings has gone up from earlier 30-35 stocks to over 45 currently. Among the sectors, the new manager has significantly cut exposure to auto and construction stocks, while building notable positions in sectors like energy, banking and services.

All these developments suggest that investors need to be more watchful here. The transition to the new fund manager has not been all that great so far, but it could be a mere aberration and nothing conclusively can be said over such a short period of time. Therefore, its performance needs to be gauged more closely over the coming months.