Mutual Funds

Tata India Tax Savings: Multi-cap exposure with deft allocation

Parvatha Vardhini C | Updated on September 21, 2019

The scheme has been a top-quartile performer in the ELSS category over 1, 3 and 5 years

Investors looking for ELSS funds can go for Tata India Tax Savings. The scheme has been a top-quartile performer in the ELSS category over one-, three- and five-year periods. Investments of up to ₹1. 5 lakh a year in equity-linked savings schemes (ELSS) qualify for deduction under Section 80 C of the Income Tax Act, and will be locked in for three years. For SIP investors, the lock-in applies for each SIP.

While the fund has a track record of more than 20 years, the growth option was not available until 2014-end. Investors should note that after the imposition of long-term capital gains tax of 10 per cent on equity gains above ₹1 lakh, choosing the growth option makes sense in any fund, as dividends are taxed at the same 10 per cent, every time they are paid out.

Strategy and performance

Tata Tax Savings is benchmarked to the S&P BSE Sensex TRI. But the fund follows a multi-cap strategy and is adept at shifting holdings across market capitalisations, depending on the market conditions. To cash in on rallies, the fund takes higher exposure to mid- and small-cap stocks. In the 2017 rally, for instance, the scheme’s mid- and small-cap holdings soared to over 40 per cent of its portfolio.

Considering the market volatility since then, mid- and small-cap holdings came down to around 25 per cent by end-2018 and further down to about 15-20 per cent this year.

Reduction in equity holdings during bearish/choppy markets is another defensive attribute of the fund.

Since March this year, equity holdings of the scheme have been at 93-95 per cent. In contrast, it was at 97-98 per cent for many months in 2017.

Over one, three and five years, the fund’s returns have been better than the category average of ELSS funds by up to five percentage points.


The fund usually has a diversified portfolio of 40-50 stocks. It tends to take a concentrated holding of 7-9 per cent in the top 2-3 stocks. The top three stocks in its latest portfolio are ICICI Bank, HDFC Bank and Infosys.

Though mid- and small-cap stocks have corrected quite a bit, the fund continues to take a cautious stance. While it held about 19 per cent in these segments (combined) at the beginning of this year, in its latest portfolio as of August 2019, it holds only about 16 per cent in mid- and small-cap stocks.

Banking is the preferred sector and holdings here have inched up slowly since 2018-end by about 4 percentage points to 32 per cent now.

Apart from SBI, all other stocks are that of private banks. Software holdings have been moved up, in time to benefit from improved prospects as well as rupee depreciation.

Consumer non-durable holdings, though, have trended downwards this year. The fund cut its holdings in ITC this year. However, it re-entered Hindustan Unilever in end-2018 and continues to stay invested in the stock. Despite the slowdown, HUL has recorded good volume growth in the past 2-3 quarters. Recent IPOs such as ICICI Lombard and General Insurance Corporation find a place in the portfolio as well.




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Published on September 21, 2019
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