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Simply the Best

HDFC Taxsaver continues to be the first choice in the category of tax-planning funds. In its history spanning over 10 years, the fund has displayed tremendous ability to race ahead during the good times, while protecting the downside well when the markets fell.

The fund has been doing this consistently year after year.

Its glorious performance also gets reflected in its star ratings-it has never been rated below four-star in the 82 months of its rated life. In the nine completed calendar years of its existence, the fund marginally under-performed its category only in 2002, while beating an average peer by more than 10 per cent in each of the remaining years. This year, the fund is up 26.68 per cent as on April 7, ahead of an average peer's 22.72 per cent.

Some smart stock picks and some quality sector moves enabled this fund to steer clear of the technology collapse with ease. The fund booked profits and reduced exposure to the technology sector at the right time before the market turned bearish in March 2000. With the exposure to tech sector down from 35.19 per cent in previous month to 12.2 per cent, the fund was sitting comfortably with 41.9 per cent of its assets in cash when the meltdown began. Though it erred in re-entering the sector a bit too early, the key contributor to the positive returns generated by the fund in 2000 was Raymond Ltd, its top holding (accounting for more than 10 per cent) from August 2000 till February 2001. While the markets were bleeding, the stock price doubled from Rs 70 in May 2000 to Rs 140 by February 2001. A high exposure to fast moving consumer goods (FMCG) stocks would have also helped. Then in 2001, the fund's dependence on pharma stocks and some select companies, like Ashok Leyland and Associated Cement Companies, saved the day for this fund. An average 10 per cent investment in bonds from the second quarter of 2000 till mid 2001 also provided a good cushion to this star fund.

The fund has been quite selective in its picks in which it invests with conviction. The number of stocks in the portfolio is generally restricted to 20-25 (though of late, that has gone up to 30), with the top five accounting for more than 30 per cent. Hindustan Zinc is the fund's top holding. After making the full use of the mid-cap rally in the last two-and-a-half years or so, the fund has started to get back to large-caps.

In short, HDFC Taxsaver is an apt core holding for an equity portfolio.