Why Canara Robeco Equity Tax Saver is a good investment

Investors looking for tax savings for the 2021-2022 fiscal year may consider investing in Equity Linked Savings Plans (ELSSs) with a three-year lock-in period, instead of rushing at the eleventh hour.

These funds help investors reduce taxable income by up to 1.5 yen under Section 80C of the Income Tax Act, and the default equity foreclosure feature prevents investors from proceeding. to hasty redemptions.

A prime candidate in this category is Canara Robeco Equity Tax Saver, which has generated good returns through market cycles and has been among the top performers.

Please note, the tax savings can only be accumulated if you opt for the old income tax system. Investors should adopt a systematic investment plan (SIP) strategy to navigate volatile market movements.

Canara Robeco Equity Tax Saver is compared to the S&P BSE 100 TRI and over periods of one, three and five years outperformed the index.

It generated annualized returns of 64%, 20% and 18% compared to benchmark returns of 52%, 7% and 10% respectively over periods of one, three and five years.

In addition, in the ELSS category funds, the program is among the best quartiles over these periods.

Additionally, over the past five years, the fund has outperformed some key peer funds such as DSP Tax Saver and Axis Long Term Equity.

The fund also exhibits strong winning consistency with its daily rolling three, five and ten year returns above the benchmark.

The program not only handled the drawbacks well, but also captured the benefits.

According to ACE MF data (3-year monthly returns ended July 16, 2021), Canara Robeco Equity Tax Saver has an upside catch ratio of 104 compared to the category average of 93.9, which means that ‘he earns more than others when the market goes up.

The fund also has a downside catch ratio of 87.4 compared to the category average of 97.1, which means it drops less than others when markets slip.

Portfolio and strategy

Canara Robeco Equity Tax Saver offers a well-diversified portfolio of fundamentally strong companies with a growth-oriented investment style. The fund invests primarily in large cap stocks and has increased this allocation to 77 percent in the past six months, from 70.8 percent. This will provide a buffer against any expected market downturn.

In contrast, it reduced the allocation to mid caps from 22.8% to 17.9% and the exposure to small caps from 3.8% to 1.7% over the past six months at a time when their valuations are excessive. It is important to note that the fund has a flexible investment strategy without sector or thematic bias, which allows it to manage a portfolio without constraints.

Canara Robeco Equity Tax Saver has consistently outperformed the average category returns since 2018. In the highly volatile 2020, the fund gained 27.3% compared to the average category return of 16%.

After increasing its allocation to bank stocks in February 2021, the fund maintained its exposure at around 23% while slightly reducing the allocation to software and consumer durables stocks.

Other key sector allocations are finance, pharma and construction. Private banks, such as HDFC Bank, ICICI Bank and Axis Bank are in the top 10 for stocks and have delivered good returns over the past year.

The fund has 55 stocks in the portfolio and the top 10 represent 46 percent of the weighting.

With the exception of a few leading stocks, the allocation to other individual stocks is less than 3% of the portfolio, which reduces the risk of individual concentration.

As of June 30, the fund is overweight in Financials, Technology, Automotive and Construction and underweight in Health Care, Consumer Staples, Energy and Metals relative to the entire ELSS category.

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About Virginia Ahn

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