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DSPBR Tax Saver: Swift on Change

The multi-cap strategy has helped the fund perform well

This is a fund that takes the growth path. The fund has rewarded investors during market rallies. But when the markets tanked in 2008, the fund lost 57 per cent almost matching the toll taken by the category average and matched its benchmark, the S&P CNX 500. The fall was mostly to do with the fund’s high exposure to mid- and small-cap stocks, which constituted 75 per cent of the portfolio by late 2007.

Both the fund managers; Anup Maheshwari and Mayana Sobti Rajani, restructured the portfolio to be defensive to protect the downside by increasing exposure to healthcare and FMCG and cutting down on metals. Today, the fund maintains a bloated portfolio with 71 stocks in its portfolio, which had touched a high of 97 in March 2008. Such a large number of stocks lead to some of them having insignificant allocation. “Building a position in a particular stock is slow and gradual, as is the case with exits. These may result in some stocks getting less allocation,” says Maheshwari.

On close examination, the fund is largely seen not to exceed 5 per cent holdings in a single stock. “The fund doesn’t have any specific limit to stocks but as far as the sector allocation is concerned we don’t deviate 15 per cent from that of the benchmark,” adds Maheshwari. The fund uses a multi-cap strategy like many of it peers and also deploys cash efficiently and currently holds 60 per cent of its portfolio in the top 100 companies by market capitalisation.

Our View
In 2009 mid- and small-cap performed better than large-caps which is reflected in its returns; it delivered 84.22 per cent against a category average of 82 per cent, and this year till November, it has gained 21 per cent compared to 16 per cent gain by the category. The fund has increased its large-cap exposure over the past few months, which can bring stability to its portfolio and returns. The growth oriented portfolio that the fund now has, will pay off in a rising market. However, there is the threat of the fund finding it tough to cushion the loss if the market tumbles.