A look at 8 tax-saving funds

By Morningstar Analysts |  07-02-19

HDFC TaxSaver

  • Star Rating: 3 stars
  • Analyst Rating: Silver
  • Fund Manager: Vinay Kulkarni, Amar Kalkundrikar

Vinay Kulkarni has a quality bias when investing in stocks. He chooses companies with good corporate governance standards and strong business models that enjoy sustainable advantages in the form of barriers to entry, market share, low cost of production, technological edge, and capable management teams. Although he prefers companies with low leverage, he is not constrained by this criterion as long as he has adequate comfort with the valuations and the business model.

Kulkarni understands that companies that satisfy his investment criteria may not be cheap, and he is willing to pay more for such issues but refrains from investing in overvalued stocks and sectors.

Kulkarni largely relies on the investment team for stock recommendations. Analysts gauge companies using discounted cash flow and quantitative models and rate them on a scale of 1 to 4. Analysts use relative valuation metrics like price/earnings and price/book value and other quantitative measures like return on capital employed when evaluating stocks. Given the investment approach, Kulkarni's portfolio reflects a growth-at-a-reasonable-price approach to investing.

While ideas are leveraged from sell-side analysts, investment decisions are based on the team's own internal research.

Vinay Kulkarni is benchmark-agnostic when constructing the portfolio; the fund's sector weights often deviate significantly from those of its benchmark, the Nifty 500 Index. That said, he aims to derisk the portfolio by investing in uncorrelated sectors of the economy. Kulkarni's portfolio has tilted in favour of large caps since 2014.

Kulkarni's portfolio clearly bears out his investment process. His holdings tend to remain fairly consistent over long time periods, and this is reflected in the fund's low turnover ratio.

The portfolio has remained devoid of stocks in the real estate sector for more than 10 years.

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