DSP BlackRock Tax Saver: Rock-solid performance across cycles

The fund is increasingly playing it safe with greater exposure to large-caps

Investors with a medium risk appetite could consider buying DSP BlackRock Tax Saver. With the market valuations appearing ‘pricey’, this multi-cap fund has increased its exposure to large-caps over the last one year.

Given that the fund has a mandatory lock-in of three years, it usually takes a 2-3-year view while investing in stocks.

Its performance — as with other equity-oriented funds — has picked up in the last one year. It managed to outperform its benchmark by a wide margin in the last one year, giving a return of 31.4 per cent as against 25.6 per cent by Nifty 500.

Its returns are in the top quartile, even when analysed from a three, five or 10-year perspective. Its annualised three-year and five-year returns are 18.4 per cent and 22.8 per cent, respectively.

More importantly, in the last three years, it has outperformed most of its peers — Axis Long Term Equity (18.1 per cent), Reliance Tax Saver (18.0 per cent) and HDFC Tax Saver (12.3 per cent) while posting lower return than Birla Sun Life Tax Relief 96 (20.1 per cent).

On a one-year rolling return basis, it has outdone its benchmark almost 100 per cent of the time in the last three years.

The fund has increased exposure to large-caps from 63-64 per cent last year to 70 per cent now. The fund usually doesn’t take cash calls.

However, during the crisis years of 2008-09, its cash levels went above 20 per cent.

What’s in, what’s out

In the last one year, State Bank of India, Larsen & Toubro and Hindalco Industries have helped spice up the fund’s returns.

While the share price of SBI was up by 35 per cent in the last one year, the stock prices of Larsen & Toubro and Hindalco Industries were up by 28 per cent and 52 per cent, respectively. Some of its picks — V-Guard Industries, Hindalco Industries, HPCL and Somany Ceramics — paid off handsomely. But Infosys, Sun Pharma and Lupin dragged down its overall performance, with the stock prices of these companies falling by 20-30 per cent in the last one year.

During the year, the fund took fresh exposure in Federal Bank (3.1 per cent), ITC (2.5 per cent) and Bank of Baroda (2.6 per cent) while completely exiting Bajaj Finance, Cadila Healthcare and Gujarat Gas.

In terms of sectors, it has increased its stake in banks (currently at 27.0 per cent of the portfolio) over the last year. While stakes in private sector banks were up by 4 percentage points, public sector banks were up even more — 6.6 per cent.

On the other hand, it reduced exposure to large software companies as well as Indian pharmaceutical companies.

Currently, SBI, GAIL and ICICI bank are its top stocks, while in terms of sectors it is financials (30.6 per cent), energy (11.6 per cent) and auto (6.4 per cent).

Its portfolio theme hints that the fund is playing it safe. Firstly, its sector exposure is not very different from that of Nifty 500; it has similar exposure as that of Nifty 500 in the top two sectors — financials and energy.

However, it is slightly overweight on metals and construction while remaining underweight on Technology and FMCG.

Moreover, its stocks are evenly spread among companies that benefit from discretionary spends by the consumer and those that benefit from industrial activity.

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