Parag Parikh ELSS Tax Saver Fund: Emphasising Value-centric Approach

Oct 18, 2024 / Reading Time: Approx. 10 mins

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Parag Parikh ELSS Tax Saver Fund: Emphasising Value-centric Approach

Welcome to PersonalFN's weekly analysis on diversified equity mutual funds! In this issue, we have analysed Parag Parikh Tax Saver Fund, highlighting its performance, peer comparison, investment strategy, fundamentals, portfolio, and suitability.

Parag Parikh Tax Saver Fund is a rising star in the ELSS (Tax Saving Mutual Fund) category that has swiftly garnered a commendable track record with a focus on value-centric approach, earning a spot among the top-quartile performers in its category.

What is the growth of Rs 10,000 invested in Parag Parikh ELSS Tax Saver Fund five years ago?

What is the growth of Rs 10,000 invested in Parag Parikh ELSS Tax Saver Fund five years ago?
Past performance is not an indicator of future returns
Data as of October 16, 2024
(Source: ACE MF, data collated by PersonalFN)
 

Parag Parikh Tax Saver Fund is a rising star in the ELSS category that aims to create a diversified portfolio comprising large, mid, and small-sized companies in India, spanning various sectors and industries. The fund places its primary emphasis on sectors and industries that exhibit appealing valuations, opting to steer clear of businesses, sectors, or themes driven by short-term momentum. Launched in July 2019, Parag Parikh Tax Saver Fund has recently completed five years of existence, during which it has demonstrated outstanding performance, capturing the attention of investors. Notably, the fund has generated returns at a CAGR of around 25% since its inception. Consequently, its corpus has more than doubled in the last one year.

Parag Parikh Tax Saver Fund's emphasis on high-potential and high conviction quality stocks with a decent margin of safety has effectively minimised the overall volatility and contributed to its impressive performance. This approach has resulted in relatively low risk levels and has led to the generation of superior risk-adjusted returns for its investors. During the 2020 market crash, the fund successfully mitigated the downside, while it has also emerged as one of the top performers in the category in the ongoing bull phase.

In the last five years, Parag Parikh Tax Saver Fund has registered growth at a CAGR of 26.2%, compared to a growth of 21.9% CAGR registered by its benchmark Nifty 500 - TRI. An investment of Rs 10,000 in Parag Parikh Tax Saver Fund five years back would have now appreciated to Rs 31,879 as against a valuation of Rs 26,860 for a simultaneous investment in its benchmark.

How has Parag Parikh ELSS Tax Saver Fund performed on a rolling return basis?

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
Quant ELSS Tax Saver Fund 11,561 46.77 28.27 31.14 33.86 25.37 17.57 0.30
SBI Long Term Equity Fund 28,733 50.60 32.44 27.37 23.23 17.67 14.24 0.40
HDFC ELSS Tax Saver Fund 16,761 40.47 27.77 26.38 19.64 15.15 12.85 0.39
Motilal Oswal ELSS Tax Saver Fund 4,195 51.17 31.23 25.40 22.49 17.80 15.85 0.37
Bank of India ELSS Tax Saver 1,486 46.40 27.35 24.18 26.86 20.97 15.74 0.25
Bandhan ELSS Tax Saver Fund 7,354 32.90 22.39 23.78 22.55 18.45 13.89 0.28
Franklin India ELSS Tax Saver Fund 7,242 39.27 24.79 23.29 19.87 15.99 13.95 0.31
JM ELSS Tax Saver Fund 187 42.85 25.90 23.03 22.19 18.35 15.27 0.30
Parag Parikh ELSS Tax Saver Fund 4,362 31.55 22.45 22.93 26.20 -- 10.74 0.36
Nippon India ELSS Tax Saver Fund 16,711 37.10 23.24 22.68 17.42 11.82 14.45 0.28
Nifty 500 - TRI 32.91 20.17 19.39 18.86 15.91 14.10 0.23
The securities quoted are for illustration only and are not recommendatory.
Returns are on a rolling basis and in %. Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised. Risk ratios are calculated over a 3-year period assuming a risk-free rate of 6% p.a.
Data as of October 16, 2024
(Source: ACE MF, data collated by PersonalFN)
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 before investing. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.
 

Within a brief time frame, Parag Parikh Tax Saver Fund has swiftly carved out a distinguished track record, standing resilient against its larger and popular peers. Even though the fund has trailed the category average and the benchmark in the last 1 year period, its focus on high quality stocks can enable it to do well over medium to long-term time frames. Over the last 2-year and 3-year periods, Parag Parikh Tax Saver Fund has generated average rolling returns at a CAGR of around 22.5% and 22.9%, respectively, outpacing the benchmark and many of its peers. Over the longer 5-year it stands among the top quartile performers and much ahead of the benchmark.

More importantly, Parag Parikh Tax Saver Fund has managed this accomplishment while keeping risk at a reasonable level. The volatility registered by the fund is the lowest in the ELSS category and is much lower compared to the benchmark. Its exceptional risk-adjusted returns as denoted by the Sharpe Ratio of 0.36 is currently among the best in the category, surpassing the benchmark by a considerable margin.

[Read: How to Select the Best ELSS for Tax-saving]

What is the investment strategy of Parag Parikh ELSS Tax Saver Fund?

Categorised as an ELSS, Parag Parikh Tax Saver Fund is mandated to invest at least 80% of its assets in Indian equities. The fund has the flexibility to invest across market caps and sectors without any limit of restriction. Guided by the principles of value investing, the fund looks to avoid momentum bets as well as stocks that are overvalued. Instead, the fund focuses on fundamentally sound, low debt, and cash generating businesses available at reasonable valuations.

Parag Parikh Tax Saver Fund adopts the bottom-up approach to invest in high quality stocks for a longer period and aims to realise the full potential of each of its stock holdings. The fund has the flexibility to invest across market caps. At present, the fund holds a large-cap biased portfolio with significant exposure to small-caps and some exposure to mid-cap stocks. The fund follows buy-and-hold investment strategy and holds each of its high-conviction stocks with a long-term view. Accordingly, it has recorded a low turnover ratio of less than 15% in the last one year.

What is the investment strategy of Parag Parikh ELSS Tax Saver Fund?

What is the investment strategy of Quant Mid Cap Fund?
Holding in (%) as of September 30, 2024
(Source: ACE MF, data collated by PersonalFN)
 

Parag Parikh Tax Saver Fund usually holds a compact portfolio of 30-35 stocks. As of September 30, 2024, the fund held 33 stocks in its portfolio, with the top 10 stocks accounting for about 58% of its holdings. The top holdings consist mainly of large-cap names such as Bajaj Holdings & Investment, HDFC Bank, Power Grid Corporation of India, Coal India, ITC, and ICICI Bank. Maharashtra Scooters is the only stock from the lower market cap among its top holdings. Most of these stocks have been part of the fund's core portfolio for over two years now.

In the last two years, Parag Parikh Tax Saver Fund benefitted the most from its exposure in Maharashtra Scooters, Coal India, Motilal Oswal Financial Services, Power Grid Corporation, and Bajaj Holdings & Investment that collectively contributed about one-third to its absolute gains. Apart from these, HCL Technologies, ITC, Axis Bank, ICICI Bank, Multi Commodity Exchange, CMS Info Systems, TCS, and Maruti Suzuki India, were among the other top gainers in the fund's portfolio.

Parag Parikh Tax Saver Fund's portfolio is diversified across 11 sectors and has a well-balanced allocation across cyclical and defensive sectors. Its portfolio is concentrated towards Banking & Finance and Infotech stocks, constituting approximately 45% of its total assets. It also held substantial exposure to Auto & Auto Ancillaries, Power, Mining, and Consumption sectors. The top 5 sectors in the portfolio collectively form nearly 60% of its assets.

Is Parag Parikh ELSS Tax Saver Fund suitable for my investment goals and risk tolerance?

Displaying outstanding performance since its inception in July 2019, Parag Parikh Tax Saver Fund has built a solid track record in a relatively shorter time span. The fund has stood strong alongside its popular counterparts in the category, instilling confidence among investors. The fund's success can be attributed to its capability to identify and invest in fundamentally sound, undervalued stocks in a timely manner.

What holds more significance is the fund management's emphasis on prioritising safety over chasing higher returns. The fund managers do not compromise on the risk factors for the sake of higher returns; instead, they uphold a diversified portfolio of high-quality stocks with a focus on the long term. This strategic approach employed by the fund house has helped effectively manage risk and facilitate commendable performance even in highly-volatile market conditions. With experienced fund managers at the helm, who have played a key role in shaping the fund's exceptional track record, the fund appears to be in capable hands.

Parag Parikh Tax Saver Fund is suitable for investors looking for a value-oriented ELSS and have an investment horizon of at least 5 years.

Watch this video to find out the best ELSS for 2024:

 

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. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

The securities quoted are for illustration only and are not recommendatory.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.


Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

 

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.

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Details of associates

  • Group Companies including:

    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;

  • Directors of the Company - Suresh Lulla; I V Subramaniam, Murali Ananthan Krishnan and Rafiq Dossani

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 Parag Parikh ELSS 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.

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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 & BASL Membership Id: 1488

Investment in securities market are subject to market risks, read all scheme related documents carefully.

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