Dundee Taxsaver is an open-end equity linked tax saving scheme launched in April 2000. Investments in the fund up to a maximum of Rs 10,000 would be eligible for rebate u/s 88 of the Income Tax Act. The investments in the fund would however, carry a lock-in of three years. The fund is available at an entry load of 1.5%.
Dundee Taxsaver, launched just around the time when the markets had started to head southwards, invested its small corpus at near-peak valuations. With the markets on a free fall ever since, the fund has had a tough debut year with its NAV dipping below the par level.
While the fund started off with an average 40% investment in technology counters, another 30% was shared by pharma and FMCG sectors, with the top 10 stocks accounting for an average 70% of the portfolio. However, towards the last quarter, this underwent a change with the fund bringing down its concentration in top stocks to 60% of the portfolio. The rest of the portfolio was invested in sectors of packaging, automobiles, finance and companies with diversified interests.
Nevertheless, the fund has lost less than its peers and has closely tracked the broad markets, thanks to a lower concentration in the volatile technology sector. Further, while it successfully booked profits in a couple of stocks outside the infotech sector, it’s active portfolio management saw it pick up infotech stocks continuously at lower levels and sell at comparatively higher levels, thus averaging out its costs. The fund has had an average 18% in cash component since July 2000. The fund since its launch has returned –22.6% as against –23.9% by the S&P CNX Nifty Total Return.
So far, the fund has been a good bundle of quality stocks from diverse sectors with its strategy only helping it ride out the stomach-churning markets with fewer scars. Further, the fund also has the advantage of a smaller size and no redemption pressure that can be leveraged to perform even in range bound markets. Nevertheless, it would be too early to recommend the fund, given its small track record.