Investors looking to save tax can consider equity-linked saving schemes (ELSS) with a three-year lock-in period. If you have not exhausted the Section 80C limit yet, you can consider investing in Mirae Asset Tax Saver.
Although the equity indices are ruling at new highs and some of the ELSS funds’ NAVs are also hovering at 52-week highs, taking the SIP route to such schemes can help get around these issues by averaging costs downwards from a long-term perspective. The lock-in can help the funds deliver good returns.
Mirae Asset Tax Saver has delivered a CAGR of 17.61 per cent since its launch in December 2015. Though the fund has a limited track record of five years compared with some of the veteran schemes, it has been in the top quartile of the ELSS category in the past one- and three-year periods. It has outpaced peers such as Invesco India Tax Plan, DSP Tax Saver and Aditya Birla Sun Life Tax Plan in these periods.
The fund house uses a blend of value and growth styles of investing and, therefore, has proved to be flexible to change its sector and stock preferences to capitalise on sector and style rotations in the market.
Over the past one- and three-year periods, the scheme has given returns of 18.3 per cent and 9.8 per cent, respectively and outperformed the benchmark — Nifty 200 TRI — returns of 13.3 per cent and 8.1 per cent.
Performance and portfolio
Mirae Asset Tax Saver limited the downside well in the 2018 market fall after delivering category-beating performance in 2016 and 2017. Again, in 2019, the fund delivered 14 per cent returns, outpacing the category average return of 8.9 per cent. The scheme’s year-to-date return of 18.1 per cent has also beaten the category average return of 13.3 per cent.
The fund remains fully invested in equity and has less than 1.5 per cent of it holdings in cash and mutual fund units. It holds about 57 stocks in its portfolio and is biased towards large-caps with a blend of growth and value-oriented stocks.
The weight of th top five stocks is 34 per cent. The fund currently has 72 per cent allocation in large-caps, 19.7 per cent in mid-caps and 6.6 per cent in small-caps.
Banking has been the fund’s preferred sector since inception. After reducing the allocation in the sector to about 22.1 per cent this September, the fund gradually increased it to 24 per cent now. It has marginally upped the allocations in the stocks of HDFC Bank, ICICI Bank, SBI and Axis Bank.
The fund has also increased its allocation in finance and pharma in recent times. It has also added telecom and retailing stocks over the past one year and doubled the allocation in the former to 3.4 per cent. Bharti Airtel and Avenue Supermarts have delivered good returns in the past three months.
Baring the top six stock holdings, the allocation in the other individual stocks is less than 3.5 per cent each, thus mitigating risk. Some of the top-performing stocks are Infosys, TCS, Dr Reddy’s Laboratories and HDFC Bank that have delivered extraordinary returns since the March lows, boosting the funds’s NAV.