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Investors seeking to invest in the equity-linked savings scheme (ELSS) to get tax benefit under Section 80C of Income Tax Act, 1961, can consider ICICI Prudential Long Term Equity (Tax Saving). The fund has a good long-term track record and has been a table topper over the past 10 years, delivering a compounded annual (CAGR) return of 16.5 per cent. ELSS funds as a category have shown signs of recovery in 2019 and delivered an average return of 3.5 per cent, while in 2018, they clocked an average negative return of 6.3 per cent.
Over the long term, three- and five-year time-frames, the ELSS category has given a CAGR return of 9.7 per cent and 10.8 per cent respectively, almost similar to the returns of the large and multi-cap category. Given the market volatility, investors should be cautious and choose funds that have a steady track record of outperforming their benchmarks over the long term.
Over seven and ten years, ICICI Prudential Long Term Equity outperformed the benchmark (Nifty 500 TRI) by delivering a CAGR return of 15.7 and 16 per cent respectively.
Performance and strategy
Though the fund performed dismally in the 2017 market rally, it contained the downside well in the 2018 corrective phase. Besides, the fund managers changed in late 2018. Despite this, the scheme delivered 7 per cent returns over the past year and, on year-to-date, it gained 5.35 per cent, largely outpacing the category average returns.
The fund follows a blend of growth and value style and invests predominately in large-cap stocks.
It also holds about 8 per cent in debt and current assets. Banks and software are the top preferred sector choices, followed by debt and pharma. Over the past one year, the fund exited the under-performing sectors such as telecommunication equipment, mineral, media and industrial products. On the other hand, it had taken exposure to sectors such as oil, consumer durables, ferrous metal and retail.
While reducing exposure to automobiles, the fund upped the weightage in the metal space. The fund is underweight in financial, FMCG, software and automobile and overweight in energy, metals, healthcare and consumer durable sectors. The fund holds 52 stocks in the basket. Exposure to individual stocks is less than 3 per cent of the portfolio; this mitigates the risk. In late 2018, the fund exited automobile stocks namely Hero MotoCorp and Eicher Motors and added Hindalco Industries, ICICI Bank and ONGC.
NTPC, Bharti Airtel, ITC and Infosys are top holdings that have delivered mixed returns over last one year.
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