GEMGAZE

November 2015 

Tax woes often make life seem like a burden. Do we not all just wish our hard-earned money would be ours, to invest for the future, without worrying about tax? This is why an Equity Linked Savings Scheme helps investors who wish to address two critical issues: tax planning and wealth creation. Invest in the ELSS GEMs and benefit from the long-term growth potential.

The consistent performance of all five funds in the November 2014 GEMGAZE is reflected in all the funds holding on to their esteemed position of GEM in the November 2015 GEMGAZE.

Magnum Taxgain Fund Gem

Strategic shift

One of the largest funds in the tax-saving category with an AUM of Rs. 4,743 crore, SBI Magnum Taxgain has been a middle-of-the-road fund in the long term but has delivered good one- and three-year performance. Over its eighteen-year record, it has held onto a three-star rating for much of the period. The fund has undergone a substantial shift in strategy in the last six-seven years. From a fund which bet big on mid- and small-cap stocks, SBI Magnum Taxgain has transformed into a large-cap-oriented ELSS fund. The fund focuses on the top 100 companies by market cap. Asset-rich companies available at attractive valuations and stable businesses with very good visibility on sustaining business momentum are the fund's key choices. In the last five years, 65-70% of the portfolio has been consistently allocated to large caps, more than the ELSS category in general. At present, the allocation to large cap stocks is at 69%. After a patchy start, this fund has delivered good returns over the last seven years mainly on the back of a switch in the strategy to a large-cap bias. The fund has also beaten the benchmark and the category in six of the last eight years. There are 44 stocks in the portfolio, with the top 5 holdings accounting for 24.91% of the portfolio. The top three sectors that the fund invests in are finance, technology, and energy. One-year return of the fund is 5.21%, on par with the category average of 5.21%. The expense ratio is 2.21% and the portfolio turnover ratio is 9%.

HDFC Tax Saver Fund Gem

A temporary lull?

At Rs. 4746 crore, HDFC Tax Saver Fund is the largest ELSS fund in the industry. Currently, large caps account for 69% of the portfolio. With 53 stocks and the top 5 holdings accounting for 30.72%, the fund looks well diversified. The top three sectors that the fund invests in are finance, technology, and energy. In the past one year, the fund has earned a return of -4.64% as against the category average of 5.21%. The expense ratio is 2.3% and turnover ratio is 25%. 

Canara Robeco Equity Tax Saver Fund Gem

Applying brakes?

The Rs. 840 crore Canara Robeco Equity Tax Saver Fund has been pretty successful in utilising the agility that a small fund offers by spotting opportunities and capitalising on them. Allocation to the top 5 holdings (26.31%) is in line with the category average. Over the past five years, financial services, energy, and technology have been part of the top five sectors and the top three sectors are finance, technology, and energy, in that order. There are 54 stocks in the portfolio with 61% allocated to largecap stocks. Canara Robeco’s ELSS fund ranks in the top quartile of funds in its category in the five-year timeframe. On an annual rolling return basis over the past five years, the fund has beaten its benchmark, BSE 100, 78% of the time. Across timeframes, the fund has beaten the BSE 100 by a margin of 4 to 12 percentage points. The fund’s strategy of investing mostly in large-cap stocks and that of switching to cash and debt when markets appear shaky has limited its returns. One-year return is 1.37 % as against the category average of 5.21 %. The expense ratio is 2.63% and portfolio turnover ratio is 39%. 

Religare Invesco Tax Plan Gem

Consistency – the mainstay

With a corpus size of Rs. 255 crore, Religare Tax Plan is one of the smallest schemes in its category, but it packs in quite a punch. The fund invests across market capitalisation and sectors and spreads its assets over 43 stocks without being overly diversified and the top 5 holdings constitute 30.74%. The top three sectors are finance, technology, and auto. Even though the fund currently has a large cap bias with 67% allocation, it has not been hesitant about being heavily invested in smaller companies. In the past too, the mid-cap and small-cap allocation have been high. Its relatively small size makes an effective mid-cap strategy viable. The one-year return is 9.08% as against the category average of 5.21%. Despite its relatively short history, the fund has consistently delivered returns for the investors. Over one, three, and five year time-frames, the fund has beaten the BSE 100 by a margin of two to five percentage points. In the rollercoaster ride the market has taken in the past five years, the fund performed well across market cycles. Stock picking has been the key for success of this fund. The expense ratio is 2.87% and the portfolio turnover ratio is 18%.

DSPBR Tax Saver Fund Gem

Sound investment strategy

DSPBR Tax Saver Fund has a fund corpus of around Rs 1095 crore. It has a growth-oriented multi cap portfolio with 72% of the corpus in large cap stocks. There are 52 stocks in the portfolio. The top 5 holdings constitute 30.18%. The top three sectors are finance, technology, and energy. The fund follows an investment strategy that remains rooted to a bottom-up approach with a predominant focus on growth-oriented stocks. The manager uses sector-based model portfolios created by analysts as his initial reference point. He combines this with absolute and relative valuation measures to pick stocks. He scouts for stocks that have high/rising return on equity along with good scalability prospects. The manager shows a value bias by investing a small portion in companies that trade at close to half their book value. Top-down research is taken into consideration when taking sector bets, with the manager typically looking for sectors that demonstrate strong pricing power. The manager pays heed to portfolio construction, with strong emphasis on liquidity and risk mitigation. DSP BR Tax Saver fund has offered 6.09% returns for the last one year as against the category average of 5.21%. The expense ratio is 2.64% and the portfolio turnover ratio is 46%.