Mutual Funds

Canara Robeco Equity Tax Saver: Tax-saving with benchmark-beating returns

Yoganand D | Updated on March 15, 2020 Published on March 15, 2020

The scheme has consistently outperformed S&P BSE 100 TRI over one, three and five years

Investors seeking to invest in equity-linked savings schemes (ELSS) for tax-saving options can buy the units of Canara Robeco Equity Tax Saver.

With FY2019-20 nearing its end, investors can consider investing in ELSS schemes which help investors reduce up to ₹1.5 lakh from taxable income under Section 80C of the Income Tax Act.

These funds invest in equity and equity-related securities with a statutory lock-in of three years.

Over the past seven- and 10-year periods, the scheme has beaten the category average returns by delivering gains of 11.6 per cent and 10.6per cent, respectively.

The fund is benchmarked against the S&P BSE 100 TRI and has outperformed the benchmark over one-, three- and five-year periods. BusinessLine Star Track MF Rating for Canara Robeco Equity Tax Saver is three-star. However, the fund has demonstrated significant improvement in its performance in the recent period, which may lead to an improvement in its rating going ahead.

In the past one year, the scheme has outpaced its benchmark by a wide margin of about 10 percentage points and limited the downside well in the recent market fall.

Portfolio and strategy

The fund deploys 95-98 per cent of its corpus in equity, and the balance in debt or cash/cash equivalent. After reducing its equity allocation to around 95 per cent in September and October 2019, Canara Robeco Equity Tax Saver upped the allocation to 98 per cent recently.

Predominately, banking is the top sector choice for the fund, but the allocation keeps varying. For example, it had increased the allocation to banks to a high of 32.6 per cent in September 2019.

Then, it gradually reduced the allocation, and held 22 per cent in the sector in January (this could be due to high volatility). In the latest portfolio it has 17.4 per cent exposure, trimmed reasonably.

The scheme mainly invests in private banks; the top holdings are in HDFC Bank and ICICI Bank. It has drastically increased its allocation to the finance sector, the second-most preferred sector — to 15 per cent. Notably, investments made in the stocks in the sector — such as Bajaj Finance, Housing Development Finance Corporation and HDFC Asset Management Company — have delivered good returns over the past year.

The fund recently started allocating towards services and retailing sectors.

It recently added automobiles, telecommunication services, healthcare services and transport sectors to the portfolio.

On the other hand, the scheme exited many sectors such as auto ancillary, cement, construction, construction projects, engineering, gas and industrial products over the past six months. Investment in software stocks like Infosys and TCS have also yielded good returns over the past year. It recently exited TCS and added Larsen & Toubro Infotech.

The scheme keeps churning its portfolio. Some of the recent additions include Bharti Airtel, SBI Life Insurance Company, Alkem Laboratories, IndusInd Bank, Dr Reddy’s Laboratories, Can Fin Homes, Escorts and TCI Express. The fund holds about 36 stocks in its portfolio.

 

Published on March 15, 2020

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