Our analysts look at 8 tax-saving funds

Apr 05, 2023

The Analyst Rating does not express a view on a given asset class or peer group; rather, it seeks to evaluate each strategy and associated vehicle within the context of an appropriate benchmark and peer group.

Morningstar analysts assign ratings for funds using various parameters. The supreme rating is a Gold, followed by Silver, Bronze, Neutral and Negative. To understand what this means, do read What the rating indicates.

Equity Linked Savings Schemes (ELSS) are diversified equity funds that offer a tax benefit under Section 80C. The funds below are presented as per the date of analysis, the latest given priority. The name of the fund is linked to a detailed report which displays portfolio information and performance data, as well as a summary of the analyst's views on that specific fund.

HDFC Tax Saver

  • DATE OF ANALYSIS: April 2023
  • ANALYST: Melvyn Santarita
  • STAR RATING: 3 stars
  • FUND MANAGER: Roshi Jain

Between 2018 and 2020, the fund was in the bottom quartile. The performance last year has been impressive, and the YTD numbers put it in the top quartile. A very experienced manager and a strong research team.

Mirae Asset Tax Saver

  • DATE OF ANALYSIS: April 2023
  • ANALYST: Nehal Meshram
  • STAR RATING: 5 stars
  • FUND MANAGER: Neelesh Surana

The fund has never been a bottom quartile performer, though it hit a rough patch in 2022. It has a long-term appeal with a high calibre team and an impressive investment process.

DSP Tax Saver

  • DATE OF ANALYSIS: April 2023
  • ANALYST: Himanshu Srivastava
  • ANALYST RATING: Bronze (Direct), Neutral (Regular)
  • STAR RATING: 4 stars
  • FUND MANAGER: Rohit Singhania

After an excellent performance in 2019, the fund slipped. The analyst says that this fund would appeal to investors with a high-risk appetite.

Nippon India Tax Saver

  • DATE OF ANALYSIS: March 2023
  • ANALYST: Zunjar Sanzgiri
  • STAR RATING: 1 star
  • FUND MANAGER: Rupesh Patel

The fund has a large-cap tilt. It's performance can be volatile though. From being a fourth quartile performer (2018, 2019, 2020) to the 17th best performer in the category (2021, 2022), it is has dropped down to the fourth quartile again.

Axis Long Term Equity

  • DATE OF ANALYSIS: November 2022
  • ANALYST: Kavitha Krishnan
  • STAR RATING: 3 stars
  • FUND MANAGER: Jinesh Gopani

The fund's performance has taken a hit in the past two years, as well as the YTD performance. But the fund manager sticks to the fund's core philosophy with a long-term outlook.

ICICI Prudential Long Term Equity

  • DATE OF ANALYSIS: August 2022
  • ANALYST: Melvyn Santarita
  • STAR RATING: 3 stars
  • FUND MANAGER: Harish Bihani

Has the potential, needs stability. It delivered an average performance last year, but has slumped this year (YTD).

SBI Magnum Long Term Equity

  • DATE OF ANALYSIS: February 2022
  • ANALYST: Himanshu Srivastava
  • STAR RATING: 3 stars
  • FUND MANAGER: Dinesh Balchandran

The current performance has been noted (2022 and YTD). The fund needs to have consistency of returns over the long haul.

Franklin India Taxshield

  • DATE OF ANALYSIS: January 2022
  • ANALYST: Himanshu Srivastava
  • STAR RATING: 3 stars
  • FUND MANAGER: Anand Radhakrishnan

(Our analyst is currently reviewing the fund hence the rating note is not accessible. This a historical note written in January 2022).

Anand seeks to manage this fund in a similar fashion as Franklin India Flexicap Fund.

He seeks companies with clean balance sheets and looks for steady businesses with sustainable competitive advantages that can generate healthy ROEs and ROCEs. A rather contrarian streak is also perceptible in the manager's stock picks. He will pare or exit positions he believes are expensive.

A valuation-conscious approach and the manager's inability to play momentum will hold the fund back during speculative or bull markets. Like other funds, this fund also struggled in the past owing to a few investment calls which could have been best avoided. Taking note of that, the investment team took measures and honed their security selection criteria to avoid investment mistakes.

Although the investment strategy is tagged with inherent biases along with higher volatility, Anand has been managing funds with a similar approach for a long time, and under him it has the potential to deliver superior performance over the long haul.

He is benchmark-agnostic while constructing the portfolio and selects stocks using a bottom-up approach. This, coupled with his penchant for contrarian bets, often results in a portfolio that is unlike that of the typical peer. For instance, his investment in the healthcare sector in 2017 bears out his willingness to invest against the grain. Broadly the portfolio will continue to have positioning which would help it to benefit from a pickup in consumption and an economic turnaround.

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