Comments
Investors can buy units of Canara Robeco Equity Tax Saver (Canara Tax) as it has been among the top performers in the tax saving funds category and has delivered returns consistently across market cycles.
Over one-, three- and five-year time periods, the fund has outperformed its benchmark – BSE 100. The level of outperformance has been to the tune of 2-8 percentage points.
A large-cap focus and the ability to shift in and out of cash positions depending on market volatility has helped the fund tide over corrections and reasonably ride on rallies.
In the past five years, the fund delivered a compounded annual return of 6.7 per cent placing it on top of tax saving funds’ category ahead of peers such as ICICI Pru Tax, HDFC Tax Saver and Franklin India Tax Shield.
Canara Tax is suitable for investors with a moderate risk appetite. Investors can park a portion of their surplus in the fund for tax saving purposes, preferably as a lump-sum. If the systematic investment plan (SIP) route is taken, it must be noted that each instalment is locked for a period of three years.
Portfolio and strategy
Due to the three-year lock-in clause that tax-saving funds come with, many schemes tend to take significant (25-30 per cent) exposure to mid-cap stocks to pep up returns. But Canara Tax has assiduously remained focussed on large-cap stocks, with exposure to mid-cap stocks restricted to around 15 per cent of the portfolio, which lowers the risk profile of the fund.
When markets turn volatile or if there is a corrective phase post a significant run-up, the fund tends to increase investments in money market instruments and cash to the extent of 10-12 per cent of the overall portfolio. This has helped contain downsides, 2011 being a case in point. It has also been able to redeploy cash reasonably quickly to gain from any market rallies.
In terms of sectors held, banking and consumer non-durables have always figured among the top. Software and pharma too have been favoured. These sectors have had a good run over the past few years and helped the fund’s performance. It trimmed exposure to sectors such as power and petroleum products that have underperformed the markets.
The fund invests in 55-60 stocks, making it quite diversified. Most of its top picks are from the Nifty basket, with a few others thrown in from the BSE 100 stable.
Canara Tax may not deliver spectacular returns. But go for it if you need a bet that can deliver steadily and consistently with the added benefit of tax savings as well.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.