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Investors looking for a relatively safe bet for their tax-saving purposes can consider Franklin India Taxshield. Over one-, three- and five-year periods, the fund has managed to outperform its benchmark, CNX 500, by margins of 6-7 percentage points.
The scheme has delivered higher returns than peers such as Canara Robeco Equity Tax Saver, HDFC Long Term Advantage and ICICI Pru Tax Plan over the past five years.
With a bulk of its investments generally made in quality large-cap names along with some mid-cap exposure, Franklin India Taxshield does not take too many risks in its portfolio. The scheme is suitable for investors with moderate risk appetite.
Given that investments under Section 80C are available for up to ₹1.5 lakh this fiscal, investors can look at parking a portion of their tax-saving investment- in this scheme. Investments through the SIP route may also be considered. But it must be noted that each instalment is locked for three years.
Portfolio and strategy Franklin India Taxshield invests 80-85 per cent of its portfolio in large-cap stocks (greater than ₹10,000 crore market capitalisation), making it a relatively safer bet. Most of its peer funds park 25-30 per cent of their portfolio in mid-cap stocks, upping their relative risk profile. Despite having lower mid-cap exposure, Franklin India Taxshield has managed to remain in the top quartile over the long term of five years. To add to the safety, across market cycles, the scheme maintains a cash position of 5-6 per cent in its portfolio.
Top holdings include names such as ICICI Bank, Infosys, Eicher Motors, Torrent Pharmaceuticals and L&T. The top 10 stocks account for a little over 41 per cent of the portfolio, thus avoiding any concentrated bets. Even in terms of sector holdings, barring banks, which account for over 27 per cent of the portfolio, all the other segments have a weightage of less than 9 per cent in the portfolio.
Franklin Taxshield managed to carry out the right change in segments so as benefit from the rally over the past one year.
It increased exposure to automobiles, auto ancillaries and industrial products, as these sectors rallied on the back of expectation of an economic recovery. Exposure to consumer non-durables and pharma has been reduced. These segments had helped the fund contain downsides during the volatile markets of 2013. Consumer non-durable stocks have been under-performing for the past one year.
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