As the tax-saving season is well underway, it may be a good time to look at mutual funds that provide deductions under section 80C. You can invest up to ₹1.5 lakh in ELSS (equity linked savings scheme), which has a lock-in period of three years.
In this regard, investors can consider Canara Robeco Equity Tax Saver for their tax-saving requirements, given its consistent track record since inception in February 2009. Canara Tax Saver has given 19.4 per cent returns compounded annually over the last nearly 14 years. It has generally beaten its benchmark – S&P BSE 500 TRI – across timelines.
The fund would suit investors with a medium risk appetite and can be held for the long term. Here’s why Canara Robeco Tax Saver can be a good addition to your portfolio, apart from fulfilling your tax-saving requirements.
Steady performance
The fund has delivered consistently over the medium and long term. In the last 10 years, the fund has delivered compounded annual returns of 14.4 per cent. Canara Tax Saver has seen its performance improve even more in recent years. In the last five years, it has generally been among the top quartile of funds in its category.
On a rolling five-year basis from February 2009 to Jan 2023, the fund has delivered 15.8 per cent returns compounded annually. It has given better returns than funds such as HDFC Tax Saver, Franklin India Tax Shield and Kotak Tax Saver.
Similarly, on a rolling five-year basis, for the period mentioned earlier, Canara Robeco Tax Saver has outperformed its benchmark over 72 per cent of the times, going by data from ACE MF.
The above data is for its regular plan. This fund’s direct plan has done much better and delivered 15.4 per cent returns in the last 10 years. Canara Robeco Tax Saver’s direct plan has outperformed the BSE 500 TRI by 1.5-3 percentage points over the long term. Lump-sums can be considered in the fund. If the SIP route is taken, you must note that each instalment is locked for three years.
Moderate risk
This scheme takes a multi-cap approach to choosing stocks for its portfolio, though there is considerable bias towards large-cap companies. In 2020, when the broader markets started rallying, Canara Robeco Tax Saver had two-thirds of its portfolio in large-caps, while mid- and small-caps had around 21 per cent and 11 per cent representation, respectively. This allocation helped the fund deliver well in the market rally. But over the past couple of years, the fund has reduced exposure to small-caps, making them a tiny portion of the portfolio, while increasing allocations to large-caps to more than 76 per cent, thus reducing risk levels.
The fund itself generally follows a growth style of investing and does go after sectors that are in favour as well. In 2020, it upped investments in software services, but started trimming it from late-2021 onwards, though it still figures among the top sector holdings. Similarly, after upping the stakes in consumer durables in 2020, it has brought down exposure considerably now. The fund has increased exposure to banks, automobiles and auto ancillaries as these have found renewed market favour on the back of an overall economic revival.
The top stocks of Canara Robeco Tax Saver are mostly picked from the Nifty 50 basket. There is a bit of concentration among the top few holdings, though that gets dissipated with outside the top-five stocks. The fund holds 50-60 stocks at most times and avoids taking heavy cash positions. It rarely takes cash or debt positions of more than 3 per cent of the portfolio at any time.
Investors can consider this fund, which, when held for the long term of 7-10 years, can deliver above-average returns and can be earmarked for specific money goals.