HDFC Taxsaver has returned an annualised yield of about 30%, which is higher than that of all the other schemes with similar tenure in its category
Launched in 1996, HDFC Taxsaver has been one of the oldest schemes and the second-largest in its category. The fund has witnessed growth even when the mutual fund industry in general was facing redemption pressure. Its asset under management (AUM) has tripled in the past one-and-a-half year to 2,980 crore.
PERFORMANCE:
During its 15-year long tenure, HDFC Taxsaver has underperformed major market indices and its benchmark, the S&P CNX 500, only in three years. Incidentally, the period of underperformance was just before the two big crises. However, it cushioned the downfall well during the crisis and also managed to recover swiftly.
For instance, just before the 2001 dot-com bust, the fund fell in its performance in 2000. Subsequently, it underperformed in 2006 and 2007, which was before the global financial crisis of 2008.
The scheme has been a top performer among the category of ELSS schemes, beating the market indices by huge margins. For instance, in 1999, HDFC Taxsaver generated outstanding 143% returns as against 63-67% returns of the Sensex and the Nifty. Even in 2003, the mid and small-cap orientation of the fund enabled it to generate 121% return as against 72% growth in the Sensex and the Nifty and 98% by the scheme's benchmark index S&P CNX 500.
In 2008 also the decline in the fund's net asset value (NAV) by about 52% was at par with the decline in the broader market indices, but slightly better than its benchmark. In 2009, it delivered 100% returns as against 80% rise in its benchmark.
The scheme has generated absolute gains of about 28% over the past three years, which is far superior to 1% returns by the Sensex and the Nifty over the past three years. The average return of all the schemes in its category has also been only 10%.
PORTFOLIO:
The portfolio of HDFC Taxsaver, underwent a restructuring in 2006, which included slashing out high beta metal sector completely. Also a significant number of small-cap stocks were shed off reducing the risk quotient of the portfolio.
HDFC Taxsaver's portfolio is well diversified to incorporate an average of about 50 stocks across sectors. The fund has a clear bias towards large-cap stocks with almost 70% of its equity portfolio in large caps.
For the sectoral allocation, the fund is highly bullish on financial, energy and healthcare sectors, which together constitute almost half of the total portfolio. The scheme has been bullish on healthcare since early 2007 when there were hardly any takers for this sector. In 2009-10, the outperformance of this sector on bourses gave a boost to the scheme's returns.
Real estate, NBFC and cement are a few sectors that the fund has always avoided. This pinched the returns in 2007, when infrastructure was at its peak, but the strategy paid off in the downturn, giving a good cushioning to the returns.
Another interesting aspect is that the fund has been fully-invested throughout. Fund manager rarely take huge cash calls. Even in downturns, the maximum cash-in-hand of the fund manager was 10%. Also, the portfolio turnover ratio of this fund is only 24%, implying, low churning of the portfolio. In fact, the portfolio comprises almost 20 stocks that fund has been holding for over three years. These include some prominent mid-caps like Apollo Tyres, Crompton Greaves, Dabur India and Sun Pharmaceuticals.
OUR VIEW:
Though fund's returns have been low in the recent past, it has not disappointed long-term investors. The fund has returned an annualised yield of about 30% since inception, which is higher than all the other schemes with similar tenure in this category.
