Return Tracker. Equity-linked savings schemes deliver for investors

With the fiscal year closure just a month way, tax saver equity funds (equity-linked savings schemes) are in focus. Tax savings schemes as a category have delivered returns higher than the market over a one-year timeframe.

These schemes have generated between 14 per cent and 39 per cent over the past year while their respective benchmarks clocked returns between 19 and 25.5 per cent.

Mirae Asset Tax Saver Fund, which was the new kid on the block, launched in December 2015, topped the performance charts on a one-year basis.

The fund managed to deliver gains 15 percentage points higher than its benchmark — S&P BSE 200 Index. The flexibility of investing in stocks across market-cap curves is a factor aiding performance.

In the past year, Mirae Asset increased exposure to themes such as FMCG, auto and banks and pruned exposure to themes such as pharma and IT.

Other schemes that have delivered healthy returns over a one-year time frame include HDFC Tax Saver Fund (34.5 per cent), Principal Tax Saver Fund (34.3 per cent), Sundaram Tax Saver Fund (33.4 per cent) and DSP BlackRock Tax Saver Fund (33 per cent).

For Principal Tax Saver Fund, its bets in the oil and gas, metals, auto, financials and cement space provided a big boost to its performance. Top gainers include National Aluminium Company (118 per cent), Escorts (169 per cent), Hindustan Zinc (86 per cent), HPCL (92 per cent), Birla Corporation (87 per cent), Ramco Cements (82 per cent) and Indraprastha Gas (68 per cent).

Sundaram Tax Saver Fund’s bets in the financials space such as Indian Bank, YES Bank, Bajaj Finserv, Bajaj Finance and Federal Bank, helped the fund stay ahead of peers. Its stock picks in the agri space, such as Coromandel International and UPL, also played out well over the past year.

DSP BlackRock Tax Saver Fund’s adept move to cut exposure to pharma and IT stocks and add stocks in the metals and oil and gas space helped the fund fare better than its benchmark Nifty 500 Index. For instance, stocks such as Vedanta (253 per cent), Hindalco (170 per cent), and HPCL (92 per cent) lifted the scheme’s NAV.

How have these schemes fared over a three-year horizon, given that you cannot withdraw investment before that? The strong performance over the last one year had a positive rub-off on the schemes’ three- and five-year performance. Besides these, schemes such as IDBI Equity Advantage, Kotak Tax Saver, Birla Sun Life Tax Relief and Axis Long Term Equity, despite a slippery ride over the past year, still managed to top the three-year performance chart.

Over a five-year period, schemes such as Axis Long Term Equity, Reliance Tax Saver, DSP Tax Saver and Birla Sun Life Tax Relief ’96 emerged winners.

Even as the average return of equity-linked tax savings schemes was better than that of the broad market, there were laggards too. Schemes that underperformed their peers across one-, three- and five-year periods include Canara Robeco Equity Tax Saver, UTI Long Term Equity and LIC MF Tax Saver.

How consistent were these funds? Mirae Asset Tax Saver, DSP BlackRock Tax Saver, Reliance Tax Saver and Canara Robeco Equity Tax Saver score over peers on consistency. Their annual rolling returns have been better than that of their respective benchmarks 97 per cent, 82 per cent, 77 per cent and 76 per cent of the time, respectively.

Others such as Principal Tax Saver and Sundaram Tax Saver, though in the top quartile in returns, on a point-to-point basis, lagged, with consistency of about 60 per cent.

COMMENT NOW