Fund Call. Aditya Birla Sun Life Tax Relief 96 - Outshines benchmark: Buy

Investors willing to take exposure to equities can consider Aditya Birla Sun Life Tax Relief 96. This Equity-Linked Savings Scheme (ELSS), laced with tax benefits under Section 80 C, has managed to outperform its benchmark S&P BSE 200 across time horizons — be it one, three, five or 10 years.

Over the last three years, it has given an annualised return of 16.8 per cent as against 9.3 per cent by its benchmark. The fund has managed to outperform most of its peers over the last three years, except Tata Tax Savings (17 per cent).

On one-year rolling return basis, the fund has outdone its benchmark 85 per cent of the time over the last three years. It went through a bad patch in early 2017, when the stock market rallied sharply. Yet, the fund has managed to outperform its benchmark over the last one year; it gave a return of 36.4 per cent against 29.1 per cent for its benchmark.

Under the aegis of fund manager Ajay Garg, the fund has taken calibrated risks which have paid off handsomely. He has been managing the fund for more than a decade. The fund itself is more than 20 years old.

The fund usually has a multi-cap approach . And, currently, it has 41 per cent of its portfolio in large-cap stocks and the rest in mid- and small-caps.

The fund has a higher penchant for mid-cap stocks than peers. But its performance has also shown that its bets are paying off.

Moreover, given that ELSS products have a lock-in of three years, the fund manager has the leeway to take long-term calls without having to worry about redemption pressures.

Sundaram-Clayton, Honeywell Automation, Gillette, Bayer CropScience and Johnson Controls - Hitachi Air Conditioning were its top five stocks as of September 30, 2017. The company is now overweight on auto, services and healthcare sectors compared to its benchmark and underweight on energy and technology.

The fund usually doesn’t take cash calls, though it takes higher sectoral bets than its peers. On occasions — like during the 2008 and 2009 crises, the cash levels had increased to about 20 per cent levels. Currently, its holding in cash and cash equivalents is about 1 per cent.

Sundaram-Clayton, Honeywell Automation, Gillette, Reliance Industries and Kotak Mahindra Bank were top contributors to its overall returns over the last one year. In contrast, Bayer CropScience, GlaxoSmithKline Pharma and Tata Motors remained the worst performers. Over the last one year, the fund got into Hindalco Industries and Aditya Birla Capital. Moreover, while it increased exposure to personal care (MNC) and pharma (MNC), it reduced exposure to private sector banks and large software companies.

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