Investors can consider adding equity linked savings scheme Canara Robeco Equity Tax Saver (Canara Tax Saver) to their core portfolio. The fund's track record of delivering 22 per cent and 18 per cent compounded annual return over three and five-year time frames places it among the top 10 funds in the diversified category. More importantly, the fund's ability to consistently beat its benchmark, irrespective of the timing of one's investment, makes the fund a good addition to a core portfolio. This trait of consistency has helped it outperform top funds such as HDFC Equity by a convincing five percentage points over a five-year period.

Suitability

The fund is suitable for equity investors with varying risk profiles given its high risk-adjusted returns. While the scheme provides tax deduction under Section 80C in the current financial year, we view the tax benefits as being merely incidental.

Amidst a host of ELSS schemes that have struggled to deliver double digit returns over a 3-5 year period, Canara Robeco certainly stands out and may be a good choice for those looking at tax benefits as well. However, it is noteworthy that ELSS schemes have not been notified for tax deduction under the Direct Tax Code which is expected to come in to effect from April 2012.

Strategy

Being an ELSS, every instalment of SIP made in the fund would suffer a lock-in of three years.

Investors may therefore be better-off going for lump sum investments. Savvy investors can consider investments linked to declines of 10 per cent or more in key indices such as the Sensex. Those uncomfortable with lock-ins may choose a dividend payout option. The fund declared dividends twice in each of the last two years.

Canara Tax Saver has convincingly beaten its benchmark BSE 100 over short and long periods of time.

Performance

Over a three-year period for instance, it delivered 22 per cent annually as against benchmark return of eight per cent. The massive outperformance though has been possible as a result of 20 per cent holding in midcap stocks.

Canara Tax Saver has consistently beaten its benchmark . Over the last three years, it has beaten its benchmark 97 per cent of the times on a rolling basis. This basically means that the fund has managed this irrespective of the timing of investments in the fund.

The fund also appears adept in reducing stakes in equity and switching back again. This helped it contain declines to about 47 per cent in the 2008 market fall as against 55 per cent equity category average. From 78 per cent equities in October 2008, it moved to over 93 per cent by April 2009, after market signalled a clear rally.

While sector choices of financials, pharma or FMCG are not offbeat, right timing in exiting overheated stocks such as Jubilant Foodworks or Lupin is noteworthy.

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