Never known to be a category killer, Sundaram Taxsaver still manages to do its job well. Though the fund has mostly witnessed falling markets since launch in November 1999, it has been a steady performer. It manages to rank in the top half of its category every year.
The fund's buy-and-hold strategy and its liking for large-cap growth stocks makes it one of the less volatile funds in the category. Moreover, the fund's policy of not taking over 5 per cent in a particular stock and spreading investment across 25 companies has been the key to its consistent stable performance. Therefore, while it may not turn in eye-popping returns in a rising market, it will also fall less in a bearish market.
In the technology-led bull run of 2000, when all equity funds delivered handsome returns, it was an average performer. During the tech crash, it was among the least affected funds in the category. This was because the fund maintained a well-diversified portfolio. Its tech exposure was limited to 30 per cent and this too was spread across nine stocks.
Even during the bearish phase of 2001, the fund outperformed its peers by a good margin. Though its larger stake in pharma and FMCG worked in its favour, the degree of diversification was largely responsible for the low downslide. Even at present, no single stock accounts for over 5.5 per cent of the portfolio.
If it has stood its ground during bear phases, it has done well in rising markets too. For example, during the recovery in the run-up to Budget 2001, PSU and FMCG stocks added to its returns. That apart, post-9/11, the fund outperformed its peers as its large-cap tech picks like Infosys, Satyam and Wipro gained heavily. In 2002, the fund clocked a return of 15 per cent. It stayed true to its large-cap theme and mostly avoided mid-caps—the performing stocks of the year. When the market fell after the Budget, the fund's conservative sector bets prevented it from taking a hit.
Sundaram Taxsaver's ability to hold its own in bearish markets with less volatility makes it an attractive pick for cautious investors. This could be a good tax-saving avenue for those who are new to equities or are unaware of market dynamics.