Mutual Funds

Invesco India Tax Plan: Benchmark-beating tax saver

Yoganand D | Updated on October 05, 2018 Published on September 30, 2018

The equity-linked saving scheme predominately invests in large-caps

The sharp fall in the bellwether indices over the past month offers a good opportunity for long-term investors to park money in Equity-Linked Saving Schemes or ELSS funds to save on taxes under Section 80C. Investors can consider Invesco India Tax Plan which has beaten category returns over a 10-year time-frame. The scheme is benchmarked against the S&P BSE 200 TRI.

It ranks among the top quartile funds across all time-frames. Invesco India Tax Plan has also consistently beaten its benchmark. The fund altered its benchmark from S&P BSE 100 to S&P BSE 200 following SEBI’s recent classification norms for mutual funds. However, its objective remains the same.

Invesco India Tax Plan has consistently outperformed its benchmark index over the past five- and seven-year periods by 5 percentage points.

Performance and strategy

Although the fund has marginally underperformed in the three-year time-frame, it has outshined its benchmark in the one-year period.

The fund has delivered 11.8 per cent and 12.6 per cent over one- and three-year periods, respectively, beating peers such as Axis Long Term Equity, Franklin India Taxshield and HDFC Tax Saver.

The fund has managed to contain downsides well in volatile markets.

During market down-cycles, such as those in 2008 and 2011, the fund was able to cap losses and steadily beat category average across time-frames by 1.5-4 percentage points. Following the February-March 2018 market correction, the fund has upped its equity allocations from about 95 per cent to 98 per cent. It does not take major cash and debt calls.

Invesco India Tax Plan predominately invests in large-caps, about 75 per cent.

However, it does take exposure in mid- and small-caps that could boost returns. There haven’t been any major churns in the sectors over the past six months apart from the fund exiting its allocations in power, industrial capital goods and fertiliser sectors. It has added ferrous metal to its portfolio.

Banks, software and automobiles are the top three preferred sectors, and the scheme has upped its stake in the software sector. Invesco India Tax Plan currently has 38 stocks in its kitty. It mainly adopts a buy-and-hold strategy. The top five stocks accounts for 34 per cent of the fund’s portfolio. It is overweight on energy, automobiles and software, and underweight on sectors such as financial, FMCG and construction. Reliance Industries, HDFC Bank, Infosys and ICICI Bank are its major holdings.

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