Birla Equity Plan: Skillful Swinging
This relatively small-sized ELSS has shown the ability to identify trends and make swift moves to generate good returns. Its annualised five-year return of over 52 per cent ranks it at the fifth place out of 19 funds.
However, the fund had not been a category-beater since inception. After its launch in 1999, the next two years turned out to be quite unnerving for its investors. With more than half of its assets committed to tech stocks, the fund lost heavily in 2000 and 2001.
But by the end of 2001, its fortunes started to change. Good sector calls, coupled with the ability to sense the opportunities and make apt moves have helped the fund emerge as a good tax-planning fund. For example, its bet on banking and technology stocks during the last two quarters of 2002 paid rich dividends.
Year 2003 was exceptional as the fund returned 161 per cent. A quick dash in select chemicals, energy and metal stocks helped the fund post superb performance in the second quarter of 2003 and propelled it to the top of the category. The fund again displayed its ability to sense an opportunity at the right time during the third quarter of 2006. The fund manager timed his entry in the banking stocks to perfection, and benefited immensely. The fund manager prefers to hold a small portfolio of around 35 stocks in which he invests with conviction. Almost each of these holdings accounts for over 1 per cent of the portfolio and therefore has a significant impact on fund's returns.
Currently, the fund is going against the herd. Its top two sectors (services and financial services) are not even among the top five of the category. Technology, one of the top holdings of other funds, accounts for less than 5 per cent of this fund's portfolio.
HDFC Taxsaver: Peer Leader
HDFC Taxsaver continues to shine with a five star rating acquired since November 2004. The fund's performance can be gauged from the fact that its rating never went below four stars in its rating history of 89 months.
The fund has always shown resilience while protecting the downside. From January this year, the fund has limited its equity investment to a universe of 31-35 stocks. This year, the fund is up 30 per cent (till November 16) against the category return of 26 per cent. But like most of its peers, the fund underperformed the Sensex's year-to-date return of 43.71 per cent. Similarly, it has lagged behind the S&P CNX Nifty's return of 36.67 per cent. For the September quarter, the fund generated 14.31 per cent, 0.64 per cent less than the category average.
Among the sectors the fund has raised its exposure to the auto sector. In September, this sector was 15.47 per cent of the fund's portfolio and it increased to 18.29 per cent in October.
From May till August, the fund had maintained its exposure to the technology pack at 11 per cent. In September it increased its tech exposure to 14.32 per cent and 14.47 per cent in October.
The fund is looking at the services sector positively. Textiles is another sector which the fund finds promising and has doubled its exposure here. The fund has completely exited from financial services while reducing exposure to the metals sector. Though Infosys remains a top holding, it has also been adding quite a few mid and small caps while moving away slightly from large caps.
With its unique ability to race ahead of peers during good times and protecting the market fall deftly, HDFC Taxsaver remains the most preferred tax-planning fund.
Magnum Taxgain: Push for Stability
Despite a miserable start, the fund has done well. Though relegated from a five to a four star in October, this fund has been able to beat the category for the past three years consistently. In the three-year period ended November 16, 2006, its 75.12 per cent annualised return has been well above the 44.56 per cent gain of the category and a lot more than 35.37 per cent of the benchmark S&P CNX Nifty.
Its year-to-date returns (till November 16) of 37.56 per cent have also been much more than the average peers' 26 per cent and slightly more than the benchmark's 36.67 per cent.
If we talk of quarterly returns, for the September quarter again the returns were good at 16.38 per cent, more than the category's average of 14.95 per cent. Apart from generating good returns, the fund is learning to manage the market crashes. In the June quarter, the fund lost just 11 per cent as compared with the category's loss of 15.35 per cent though historically it had lost more than category averages in the bearish markets. Since January this year, the fund had been mopping up large-cap stocks slowly.
Small caps, which used to consume over half of its assets about a year and half ago, now account for just 10 per cent of its assets. The fund has, however, not altered much with the allocation to mid-cap stocks.
The fund has seen several manager changes since November last year but there had been no effect on high returns generated by it. Technology sector has the fund's highest allocation and it may not come as a surprise that Infosys is its top holding. It has held on to stocks like Thermax, Gujarat Ambuja, KPIT Cummins, Kotak Mahindra Bank, Praj Industries for the past three years.
Prudential ICICI Tax Plan: Flashy Performer
A high-return, high-risk option, it may not go down well with investors who are looking for stability over flashy returns. Its concentration in small- and mid-cap stocks is a testimony to this fact. Mid and small caps occupy almost equal space in its portfolio, at 44.91 and 44.64 per cent, respectively. Large cap companies have a small presence at 4.66 per cent. The previous month - September- large caps had a marginal presence at 1.17 per cent while the concentration of mid caps was over 50 per cent.
The fund is no doubt aggressive but it has been able to justify its strategy through good returns. The fund is not only aggressive in selecting stocks but also churns its portfolio very vociferously. The fund manager loves to try out stocks but the buy-and-hold strategy does not seem to be his priority. The fund's quarterly returns for September stood at 23 per cent, much more than category average of 15 per cent. However it paid the price for being too aggressive. After the May crash, the fund had lost heavily. In the June quarter, it had lost 15.75 per cent, slightly more than the category's loss of 15.35 per cent.
However, it recovered in the September quarter and generated 23.35 per cent during the period. With a portfolio of around 50 stocks, the top five holdings account for almost a fourth of its assets. Healthcare sector remains the top holding of the fund followed by textiles, diversified and FMCG.
The technology sector occupies a paltry 4 per cent allocation. In October, the fund increased its allocation to the basic/engineering sector by 56 per cent. HEG remains the top holding of the fund comprising 5.06 per cent of the portfolio, followed by Cadilla (5.04 per cent), Kesoram Industries (4.99 per cent) and ITC (4.51 per cent).
This article was originally published on December 01, 2006.
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