A seasoned performer

Launched in 2005, Kotak Tax Saver Regular fund has weathered many market crests and troughs to emerge as a seasoned performer in the tax-saving category. Like most ELSS funds, its investment strategy has a long-term focus and large-cap-orientation, with 65 per cent of its assets under management of close to Rs 500 crore being allocated towards large-cap stocks.

The approach is similar to the strategy the fund house has adopted in case of other equity funds. “The focus is on bottom-up investment ideas and Growth at Reasonable Price (GARP) approach. Typically, we look for compounding characteristics of earnings growth at reasonable valuations, and build portfolio around that strategy,” says Kotak Mahindra AMC’s chief investment officer (equities) Harsha Upadhyaya, who has been managing the fund since August 2015. The fund sticks to this approach irrespective of whether bulls or bears are in command at the bourses, preferring to rely on sector allocation and stock selection to deal with market conditions. Cash levels generally do not cross 7.5% of the corpus. HDFC Bank, Reliance Industries and ITC make up its top three holdings.  

Despite the emphasis on large-cap stocks, focus on mid- and small-cap exposure, which currently stands at 32.5 per cent, too is core to the scheme’s investment approach. Upadhyaya sees the multi-cap approach as the fund’s USP. “While the large cap allocation provides stability, the potential kicker in returns is expected from mid/small cap exposure. With relatively low portfolio churn, the investment focus has always been long term,” he says.

While picking stocks, he looks to invest in businesses that are scalable in nature and display high capital efficiency. Competitive edge over their rivals is another key selection criteria. “We have always placed a lot of importance to management quality and corporate governance track record. We have avoided companies that have high level of event, policy or regulatory risk,” says Upadhyaya.  He attributes the fund’s overall performance equally to sector allocation and stock selection.

Returns Record

The fund has consistently beaten its benchmark Nifty500 largely across periods, but it has a mixed record when compared to its peers. It has outperformed the category in one- and three-year periods, but lags behind when it comes to five-year returns. Its performance in the last one year has been strong, beating the category average by a substantial margin. Given its overall performance across periods and recent uptick, it is worth consideration if you are looking to make a tax-saver investment this season.

preeti@outlookindia.com