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The tax planning season comes to a close in less than four weeks’ time. If you have the appetite for risk, ELSS funds fit the bill.
Investors can consider DSP BlackRock Tax Saver on the basis of its long-term track record.
Launched in January 2007, the fund has managed to beat its benchmark Nifty 500 by between 5 and 7 percentage points over one, three and five-year periods.
On a one-year rolling return basis, the fund has managed to beat its benchmark 82 per cent of the time in the last five years.
Reads market direction well Irrespective of market direction, over the last five years, the fund has been almost fully invested in equities, with holdings ranging between 94 and 99 per cent.
Both in the bear market of 2011 and flat market of 2015, the fund’s equity holdings averaged 97 per cent.
Low cash/debt holdings have not impeded performance relative to its benchmark during volatility. Except during calendar year 2011, when the benchmark and the fund shed almost 30 per cent each, the fund has outperformed the benchmark most other times.
High holdings in equities have helped it to latch on to rallies early enough.
During 2012, while the benchmark gained 30 per cent, the fund outpaced with returns of 38 per cent.
The fund managed this by tactically reducing its large-cap exposure from 70 per cent to 64 per cent and increasing holdings in mid and small-cap stocks to take advantage of the rally in these stocks then. It bought into Atul, Motherson Sumi, IndusInd Bank, Bharat Petroleum, and Bata India while trimming exposure to large-caps such as Cipla, Nestle, Sun Pharma and HDFC Bank.
Adding Shree Cement, United Spirits, Zee Entertainment, TTK Prestige and completely exiting Jindal Steel also helped pad up its returns.
Over this time period, Atul posted stellar returns of 141 per cent, while Motherson Sumi clocked 80 per cent gains.
Current portfolio As of January 2016, three-fourths of the fund’s equity investments are allocated to large-caps and the remaining to mid and small-cap stocks.
The new fund manager since July 2015, Rohit Singhania, is now betting on the economic recovery and consumption themes with banks, autos and petroleum products being the top three sector choices.
Over the last year, HDFC Bank replaced SBI as the fund’s top holding and the fund recently upped its stake in Tata Motors.
As the fund trimmed holdings to 55 stocks from around 75, the top 10 stocks now constitute 50 per cent of its holdings, up from 35 per cent a year ago.
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