This equity-linked savings plan (ELSS) is primarily driven by bottom-up stock selection with an overlay of top down views and valuations to construct the fund’s portfolio. The portfolio typically has 45-50 stocks and is always well diversified to protect against extreme bottom-up driven outcomes. The three year lock-in instils patience among investors and allows the fund manager to allocate monies into smaller and often younger companies, which have significant growth prospects.
The fund manager follows a proprietary stock categorisation system, which serves as the primary tool for stock selection. Overall, his preference is for companies that demonstrate a healthy return on equity- this is evaluated over a business cycle where appropriate. Sustainability of growth, cash flows, strength of the business model and balance sheet are other important factors along with valuation.
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The fund has consistently done better than its benchmark during both bear and bull phase of the markets. The fund contains the downside when the markets fall, which is a hallmark of this fund. All these traits make this fund a good choice for investors who are looking for tax planning fund which is not very aggressive and consistently does better than its benchmark.
