Wednesday, March 5, 2014

IDFC Tax Advantage ELSS Fund

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The portfolio is getting less defensive and this may help the fund ride any recovery

With the fiscal year drawing to a close, here is one fund that may not just help you save tax, but also generate reasonable returns over a three-to-five year period.

Outscores peers

IDFC Tax Advantage Fund (ELSS) has consistently bettered its benchmark BSE 200 across one-, three-, and five-year time frames. Not just that, it has also outperformed peer funds — Birla Sun Life Tax Plan, HSBC Tax Saver Equity and SBI Magnum Tax Gain across all time periods.

The fund's performance has improved significantly in the last three years.

Its strategy to increase allocation to foreign exchange earners such as IT, auto and pharma stocks, and reduce exposure to metals, and oil and gas helped the fund clock top quartile performance in the last three years.

Since its inception in December 2008, IDFC Tax Advantage has delivered returns higher than its benchmark during rally phases. Likewise, it has also managed to contain downsides during corrective phases.

The fund scores over its peers on consistency, too. In the last five years, its annual performance has been better than its benchmark 91 per cent of the time. A systematic investment of 1,000 in the fund over the last five years would have earned annual returns in excess of 11 per cent.

Mid-cap exposure

In the last six months, the fund has shed its defensive skin a tad by buying into select beaten down themes. Even as it continues to bet on pharma and consumer stocks, IDFC Tax Advantage has added a few stocks in the financials, construction projects, capital goods and telecom space. However, it has reduced exposure to refinery, power and IT stocks during this period.

The fund has also gone down the market cap curve by increasing exposure to mid-cap stocks within the respective sectors in the last six months.

For instance, in the banking space, the fund has reduced exposure to HDFC Bank and added Punjab National Bank and Development Credit Bank to its portfolio. This has led to a fall in the portfolio's weighted average market capitalisation from over 71,000 crore by end-July 2013 to 42,000 crore in January 2014.

The fund held 36 stocks in its portfolio as of January.

Sector bets

With IT, pharma and consumer non-durables as its top sector bet, the fund may be well-placed to tide over volatility. With any recovery in the economy, the fund's investments in high beta themes such as banking and capital goods will likely aid performance.

 

 

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

 

 

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