IDBI Principal Tax Saving Fund

FUND PICK

 Carrying an unfocussed and wildly diversified portfolio of over nearly 100 stocks, the fund went nowhere in its first two and half years. Little consolidation and the start of tech lead rally in early 1999 gave it an opportune lift. This coincided with the start of repurchase after 3-years lock-in period and the fund's asset base shrunk by 30 percent.

 Consequent to the induction of Principal as a new owner in AMC in April 1999, the fund has a new manager at helm. The fund stresses more on return consistency, discipline and risk control. This was visible in consolidation of the portfolio without getting overly concentrated.

 On strategy, the fund manager Tridib Pathak claims an eye on spotting undervalued stocks emphasizing business fundamental, without any style affiliation to growth or value investing. The fund's changed track yielded results in 1999. It was up 128 percent, lower than many peers but since the fund kept away from technology momentum plays, it performed better than its peers in the fall that ensued.

 Moreover, the fund's shift towards defensive sectors in 2000 helped it hold the ground. The fund lost 18 percent, against a 22 percent loss on an average in tax saver funds. In 2001 again, the fund lost 18 percent, a little less than the average.

 The fund has been well diversified across large and mid-cap stocks. The fund has been a contrarian with some of its big bets like the Corporation Bank and Bluedart Express. Even the absence of automobile stocks in the portfolio reflects that.

 Besides these broad changes, its early emphasis on PSU stocks has done very well for the fund in recent times. It had almost 20 percent allocation to PSU stocks -- Bharat Petroleum, Hindustan Petroleum, Container Corp and Nalco before March 2001 though it reduced its exposure in oil stocks after September to rebuild again. With this it gained 14 percent in the last quarter of 2001 and has leaped another 24 percent in 2002, through March 26. By its shape and behaviour the fund looks like a fine long-term growth pick.