In the past year, IDBI-Principal Tax Savings has been steadily climbing up the performance charts. Its strong showing in 2002 has helped in wiping off its underperformance of the previous two years. Apart from offering a tax rebate, the scheme—unlike its peers—also comes attached with a personal accident insurance cover of upto Rs 5 lakh.
The technology boom of 1999 imparted some momentum to the fund. While the fund was up a whopping 128 per cent in 1999, it was no match for the category's 201.45 per cent return. As equity markets took a severe beating in 2000 and 2001, the fund's returns also hit the negative zone. During this period, the fund also underperformed its benchmark S&P CNX Nifty.
Post -9/11, the fund reduced its technology exposure, from 15 per cent to 6.4 per cent, and moved to the pharma sector. This move, however, hurt the fund as technology stocks staged a sharp recovery after September. IDBI-Principal Tax Savings thus ended the year losing 18.42 per cent.
However, the fund bounced back in 2002. Evidently, it did everything right last year. The fund turned in an outstanding return of 30.36 per cent, outperforming both the category and the benchmark. In the first quarter of 2002, the PSU rally helped the fund gain 24 per cent. IDBI-Principal Tax Savings Fund had parked around one-fourth of its portfolio in PSU stocks in early 2002. In September 2002, the fund booked profits in PSU stocks by exiting HPCL, BPCL and Nalco. This move helped the fund steady its NAV, as PSU stocks took a beating subsequently when the government announced that disinvestment would be on hold for three months.
In the fourth quarter of 2002, it increased exposure to technology and automobile stocks. An appreciation in these stocks helped the fund gain 11.2 per cent in the last quarter of the year. In December 2002, its top sector was technology against FMCG in 2001. Timely portfolio alignment thus worked in the fund's favour in 2002. Also at a time when mid-caps were in the limelight, this performance has come through a portfolio of predominantly large-cap stocks.
Going by its recent performance, this fund is clearly on a turnaround path making it an attractive pick.