DSP Tax Saver Fund: Participating in the Growth of Equities

Sep 22, 2022

Listen to DSP Tax Saver Fund: Participating in the Growth of Equities

00:00 00:00


We are slowly approaching the second half of the financial year 2022-23. Many of us often delay our tax saving plans and keep on procrastinating until the last quarter of the financial year. I believe that the plans for tax savings should not be kept until the last moment. It may be an apt time for you as an investor to start thinking and begin with your tax saving exercise for the current financial year.

ELSS, also known as Tax-saving Mutual Fund, offers income tax saving benefits to investors. They are a type of diversified equity mutual funds that qualify for tax exemption under Section 80C of the Income Tax Act.

DSP Tax Saver Fund is one such ELSS. The fund aims to identify growth-oriented stocks with an eye on valuation and has generated a reasonable lead over the benchmark and many of its peers in the long run.

Graph 1: Growth of Rs 10,000 if invested in DSP Tax Saver Fund 5 years ago

Launched in January 2007, DSP Tax Saver Fund is an ELSS that invests in a well-diversified portfolio of stocks spread across large-cap, mid-cap, and small-cap segments. It seeks to invest predominantly in the best ideas across established and emerging businesses to provide a combination of growth and stability. DSP Tax Saver Fund evaluates stocks from the investment universe based on their growth prospects, fundamental attributes, and valuation metrics. As a part of its risk management process, DSP Tax Saver Fund constantly monitors the stock performance against the changes in its fundamentals. The fund uses a blend of investment styles and invests across market cap range to make the portfolio durable in the long term and do well across market cycles. The fund manager follows an active investment approach to hunt for various opportunities with an eye on valuation. This strategy has enabled the fund to generate a reasonable lead over its benchmark Nifty 500 - TRI as well as its prominent peers. In the last five years, DSP Tax Saver Fund grew at a CAGR of 13.7%, which is slightly higher than the 12.9% CAGR generated by the benchmark over the same time period. An investment of Rs 10,000 in DSP Tax Saver Fund five years ago would have now grown to Rs 19,039.

Graph 1
Past performance is not an indicator of future returns
Data as on September 20, 2022
(Source: ACE MF)
 

Table: DSP Tax Saver Fund's performance vis-á-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
Quant Tax Plan 1,787 25.23 50.05 44.40 24.24 25.41 26.42 0.39
Bank of India Tax Advantage Fund 645 2.08 29.52 27.44 15.64 16.72 21.33 0.30
IDFC Tax Advt (ELSS) Fund 3,851 11.05 36.69 25.12 14.40 16.15 25.81 0.26
Canara Rob Equity Tax Saver Fund 4,198 4.92 28.78 24.53 17.05 16.01 21.33 0.28
Mirae Asset Tax Saver Fund 13,148 2.94 29.02 22.94 16.20 -- 23.21 0.25
Union Long Term Equity Fund 553 6.14 29.00 22.34 13.79 12.59 21.84 0.25
Kotak Tax Saver Fund 2,936 10.68 30.35 22.01 14.35 15.39 22.27 0.24
PGIM India ELSS Tax Saver Fund 416 8.69 31.98 21.76 13.85 -- 22.46 0.24
UTI LT Equity Fund (Tax Saving) 2,997 2.67 28.30 21.20 13.24 13.60 22.67 0.23
DSP Tax Saver Fund 10,219 4.51 30.98 21.03 13.74 15.99 22.91 0.23
NIFTY 500 - TRI 5.68 28.63 20.10 12.89 14.17 23.13 0.22
Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on September 20, 2022
(Source: ACE MF)
*Please note, this table only represents the best-performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.
 

DSP Tax Saver Fund holds a reasonable long-term track record. The fund has delivered market-beating performance and stands among the above-average performers across most time periods. In the last 2-year and 3-year periods, DSP Tax Saver Fund has maintained a significant lead of about 1-2.5 percentage points over the benchmark and outpaced many of its peers. Its robust performance in the last couple of years has helped scale up its long-term returns. Over the longer 5-year and 7-year period, the fund has generated a decent lead over the benchmark and the category average.

Despite following an active investment strategy, DSP Tax Saver Fund has managed to limit the risk. The volatility registered by the fund (22.91%) is nearly in line with the category average and the benchmark index. Its Sharpe Ratio (0.23) signifies that the fund's risk-adjusted returns are better than many of its prominent category peers and ahead of the benchmark.

DSP Tax Saver Fund: Participating in the Growth of Equities
Image source: www.freepik.com - photo created by rawpixel.com
 

Join Now: PersonalFN is now on Telegram. Join FREE Today to get 'Daily Wealth Letter' and Exclusive Updates on Mutual Funds

 

Investment strategy of DSP Tax Saver Fund

DSP Tax Saver Fund is an equity-linked saving scheme that follows a multi-cap approach to investing across large, mid, and small-cap stocks. The fund uses a blend of growth drivers and valuation metrics to determine the attractiveness of the stocks. It invests 65-75% of its assets in stocks with strong business fundamentals and growth prospects with the remaining 25-35% in companies having potential for valuation re-rating from business turnarounds and those available at deep values.

DSP Tax Saver Fund's portfolio is diversified across various sectors to make it durable. It uses the top-down approach to assess the overall attractiveness of the sectors and to take the underweight/overweight position in the respective sectors. The fund endeavours to hold a maximum of 60-65 stocks in its portfolio. While picking stocks, the fund managers give consideration to stocks with low price-to-earnings, price-to-book, and price-to-sales ratios, as well as improving margins, asset turns, and cash flows, amongst others.

The company-wise analysis focuses on the historical and current financial condition of the company, potential value creation/unlocking of value and its impact on earnings growth, capital structure, business prospects, policy environment, the strength of management, responsiveness to business conditions, product profile, brand equity, market share, competitive edge, research, technological know-how and transparency in corporate governance, among other factors.

Graph 2: Top portfolio holdings in DSP Tax Saver Fund

Graph 2 Graph 2
Holding in (%) as of August 31, 2022
(Source: ACE MF)
 

DSP Tax Saver Fund usually holds a fairly large portfolio of around 55-60 stocks. As of August 31, 2022, the fund held as many as 55 stocks in its portfolio, with the top 10 stocks together constituting around 46.1% of its assets. ICICI Bank is currently the top holding with an allocation of 9.4%, followed closely by HDFC Bank, Infosys, Axis Bank, and SBI. Notably, 4 out of the top 5 stocks in the portfolio belong to the banking sector. Though DSP Tax Saver Fund tends to frequently churn a significant portion of its holdings, it has shown patience with many of its core stock holdings.

In the last one year, DSP Tax Saver Fund has benefitted the most from its holdings in ICICI Bank, SBI, GHCL, Century Plyboards (India), NTPC, and Bharat Electronics, among others. It booked profits in Cholamandalam Investment & Finance Co., KEI Industries, L&T, and Kotak Mahindra Bank, among others.

In terms of sector, Financials top the list of allocation with an allocation of 37.5%, which includes exposure of 28.6% in Banks and 8.9% in Finance. Infotech, Auto, Pharma, Engineering, and Consumption are the other core holdings in the fund's portfolio having allocation in the range of 4-10%. The top 10 sectors together account for around 80.9% of its assets. Around half of DSP Tax Saver Fund's portfolio is invested in cyclical sectors with a balance in defensive and sensitive sectors.

 

Suitability

DSP Tax Saver Fund is an actively managed fund and agile in its approach, which enables it to take advantage of various investment opportunities present across market caps and sectors and accordingly maintains a diversified portfolio of stocks. The fund managers seek growth and value while picking stocks for the investment portfolio. They do not resist churning the portfolio to cash in on the available opportunities. The strategy has enabled the fund to reward investors handsomely over longer periods in the past.

While DSP Tax Saver Fund's performance has not been among the best during bearish market phases when compared to its peers, it is reasonable relative to the benchmark. The fund's performance during the bull market phases is commendable wherein it has managed to maintain a noticeable lead over the benchmark and has also outpaced many of its prominent peers. The fund has shown the potential to do well over complete market cycles.

DSP Tax Saver Fund is suitable for investors looking for an actively managed tax-saving fund and benefits under section 80C with a time horizon of at least 3 to 5 years.

 

Warm Regards,
Divya Grover
Research Analyst

 

PS:  If you are looking for quality mutual fund schemes (including Equity-linked Saving Schemes) to add to your investment portfolio, I suggest you subscribe to PersonalFN's premium research service, FundSelect. PersonalFN's FundSelect service provides insightful and practical guidance on which mutual fund schemes to Buy, Hold, and Sell.

Currently, with the subscription to FundSelect, you could also get Free Bonus access to PersonalFN's Debt Fund recommendation service  DebtSelect.

If you are serious about investing in a rewarding mutual fund scheme, subscribe now!

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

 

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. HelpYourNGO.com India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Suresh Lulla;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
  1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company; except for one of the Research Analysts holding units of DSP Tax Saver Fund;

  3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

  4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

Disclosure with regard to receipt of Compensation
 
  1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

  4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

  5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

General disclosure
  1. The Research Analyst has not served as an officer, director or employee of the subject Company.

  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013



Add Comments