Mirae Asset Tax Saver Fund: Soaring High Through Growth Stocks
Jan 23, 2020

Author: Divya Grover

Mirae Asset Tax Saver Fund: Soaring High Through Growth Stocks
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ELSS as an asset class has various benefits over other tax-saving instruments. It has the potential to generate higher returns for its investors and has a lower lock-in period of 3 years. If you invest in the right schemes, you can gain much higher returns than you can probably expect from a tax saver bank fixed deposit, PPF account, NSC or any other tax-saving schemes. This makes it a worthy avenue for tax planning and long term wealth creation provided you are willing to take higher risk.

Mirae Asset Tax Saver Fund (MATSF) is one such ELSS that aims for wealth creation through equities and tax saving benefit with a single portfolio.

Launched not long back ago in December 2015, MATSF manages a corpus of Rs 3,066 crore. The fund is managed by Mr Neelesh Surana (since inception) who has over 24 years of experience in equity research and portfolio management.

 

Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Tax Saver Fund since inception

MATSF’s performance since inception has been remarkable. If you had invested Rs 10,000 in the fund on its inception (December 28, 2015), it would have appreciated to Rs 20,396 now (as calculated on January 22, 2020). This translates into compounded annualised growth rate of 19.1%. In comparison a simultaneous investment of Rs 10,000 in its benchmark Nifty 200 - TRI would now be worth Rs 15,775 (a CAGR of 11.9%). MATSF has managed to grab investor’s attention in a short time span dues to its superior performance over the benchmark.

Graph 1: Growth of Rs 10,000 if invested in Mirae Asset Tax Saver Fund 5 years ago
Data as on January 22, 2020
(Source: ACE MF)

 

Graph 2: Mirae Asset Tax Saver Fund's year-on-year performance

Graph 2: Mirae Asset Tax Saver Fund's year-on-year performance
*YTD as on January 22, 2020
(Source: ACE MF)

Launched in December 2015, MATSF does not have long term performance track record to its credit. However, the fund managed to make its presence felt due to its robust performance in this short time span. The year-on-year performance comparison of MATSF with respect to its benchmark Nifty 200 - TRI shows that the fund outpaced the benchmark with a noticeable margin in 3 out last 4 calendar years. Its outperformance over benchmark has been in the range of 6-14 percentage points. MATSF trailed the index only in CY 2018, where it generated negative returns. In the current year, the fund has decent lead over the benchmark till now.

Table: Mirae Asset Tax Saver Fund's performance vis-a-vis category peers

Scheme Name Corpus (Cr.) 1 Year (%) 2 Year (%) 3 Year (%) 5 Year (%) Std Dev Sharpe
Mirae Asset Tax Saver Fund 3,066 9.49 10.70 19.33 NA 13.07 0.27
JM Tax Gain Fund 36 7.05 7.37 15.02 14.35 13.91 0.19
Motilal Oswal Long Term Equity Fund 1,648 1.05 4.61 14.89 15.05 14.03 0.17
Axis Long Term Equity Fund 21,473 8.08 11.37 14.77 15.89 12.90 0.24
Tata India Tax Savings Fund 2,094 7.57 7.38 14.04 13.66 14.28 0.18
Taurus Tax Shield Fund 68 2.31 7.61 13.78 12.07 12.42 0.18
Invesco India Tax Plan 988 4.10 8.88 13.75 14.93 12.44 0.19
Canara Rob Equity Tax Saver Fund 1,005 8.16 9.91 13.59 11.84 12.88 0.19
Kotak Tax Saver Fund 1,068 8.49 6.66 13.51 14.54 12.71 0.17
LIC MF Tax Plan 263 6.13 8.66 13.44 12.29 12.52 0.20
DSP Tax Saver Fund 6,260 7.65 6.23 13.19 14.44 13.57 0.15
IDFC Tax Advt(ELSS) Fund 2,119 -2.13 4.46 13.10 13.66 15.13 0.13
Aditya Birla SL Tax Relief '96 10,029 0.16 6.37 12.62 14.96 12.93 0.14
PGIM India LT Equity Fund 356 4.63 6.40 12.58 NA 12.05 0.16
Principal Tax Savings Fund 408 -1.79 3.06 12.44 12.19 15.01 0.10
BOI AXA Tax Advantage Fund 266 -1.95 4.41 12.22 11.87 16.56 0.16
Essel Long Term Advantage Fund 59 5.62 5.52 12.03 NA 12.98 0.13
L&T Tax Advt Fund 3,382 -2.84 2.66 11.51 12.23 13.12 0.11
ICICI Pru LT Equity Fund (Tax Saving) 6,707 5.01 7.54 11.39 11.99 12.43 0.12
Quant Tax Plan 10 1.83 3.99 11.29 15.98 14.19 0.09
NIFTY 200 - TRI 5.12 7.73 12.96 10.92 12.46 0.17
Returns are on a rolling basis and in %, calculated using Direct Plan - Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on January 22, 2020
(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.

MATSF outpaced the benchmark and category average across rolling period, generating a lead of around 3-6 percentage points.

The fund stood among the category toppers across rolling period. JM Tax Gain Fund, Motilal Oswal Long Term Equity Fund and Axis Long Term Equity Fund were the other top performers during the period.

In terms of risk-return profile, the fund's volatility has been slightly higher than the category average but nearly in line with the benchmark. Regardless, it managed to reward investors with superior risk-adjusted returns as denoted by its Sharpe ratio.

Investment strategy of Mirae Asset Tax Saver Fund

Categorised as ELSS, MATSF is mandated to invest minimum 80% of its assets in equity and equity-related instruments. The fund has the flexibility to invest across market capitalisation, styles and themes.

MATSF focuses on building a diversified portfolio of strong growth companies having a robust business models, enjoying sustainable competitive advantages as compared to their competitors and having high return ratios across market capitalisation and sectors.

The fund manager invests in companies that are likely to benefit from macroeconomic, industry and sectoral trends (Top down Theme Overlay) after doing bottom up analysis and due diligence, determining quality of management in terms of corporate governance and commitment to minority shareholders etc.

The fund manager aims to have a large base of stocks in the portfolio to avoid concentration risk and liquidity risk.

 

Graph 3: Portfolio allocation and market capitalisation trend in Mirae Asset Tax Saver Fund

Graph 3: Portfolio allocation and market capitalisation trend in Mirae Asset Tax Saver Fund
Holding (in %) as on December 31, 2019
(Source: ACE MF)

MATSF has the flexibility to invest across market capitalisation. Accordingly, the fund adopts a multicap approach though with a large cap bias. In the last one year, the fund's allocation towards large caps has been in the range of 70-75%. The fund also looks for opportunities in mid and small caps. Its allocation towards mid caps is in the range of 13-20 while the allocation towards small caps is in the range of 7-10%. The fund remains fully invested in equities, however, it does not resist from taking high cash calls if required. Its cash holdings in the last one year averaged 1.7% of its assets.

Graph 4: Top portfolio holdings in Mirae Asset Tax Saver Fund

Graph 4: Top portfolio holdings in Mirae Asset Tax Saver Fund-1 Graph 4: Top portfolio holdings in Mirae Asset Tax Saver Fund-2
Holding (in %) as on December 31, 2019
(Source: ACE MF)
 

As on December 31, 2019, MATSF held 55 stocks in its portfolio across various sectors. The top 10 stocks constitute 45.7% of its portfolio. HDFC Bank has the highest stock allocation of 8.9%, followed by ICICI Bank 6.3%, SBI 4.8%, Reliance Industries 4.6% and L&T 4.2%. Rest of the stocks in top 10 holding have allocation in the range of 3-4%. Notably, 5 stocks in its top 10 holding belong to the Banking sector.

In terms of sector, the fund has the highest exposure to financial services which includes Banks 27.7% and Finance 8%. Consumption 11.8%, Infotech 8.2% and Petroleum Products 6.7% follow closely behind. Engineering, Pharma, Textiles, Auto, among others are the other prominent sectors in the portfolio.

Top contributors

In the last one year the fund gained significantly from its holdings in ICICI Bank, Reliance Industries, HDFC Bank, Info Edge (India), Tata Global Beverages and Axis Bank which together contributed weighted return of around 9%. The fund also gained from its holdings in Kotak Mahindra Bank, Dr Lal Pathlabs, TCS, SBI, Titan Company, Divis Laboratories, among others.

On the other hand stocks like Khadim India, Ceat, ITC, Jyothy Labs, L&T, etc. eroded some of its gains.

Suitability Mirae Asset Tax Saver Fund

MATSF has benefited by investing in high growth-oriented stocks but at right valuations, rewarding investors with superior returns over benchmark and category peers. The fund maintains a diversified portfolio of quality stocks with a long term view. However, the concentrated allocation to Banking sector may lead to high volatility, if the sector comes under pressure for any reason. As ELSS come with a lock-in period, investors do not have an exit option in case the scheme underperforms during that period. Such funds are suitable only for aggressive investors having moderately high risk appetite, along with an investment horizon of 5 years or more.

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.

Editor's note:  The last few years have not been among the best for equity mutual funds. While most funds have underperformed or are struggling to match the returns of the benchmark, there are few funds that have the potential to constantly generate alpha for its investors. And we have identified five such high alpha generating funds, in our latest report 'The Alpha Funds Report 2020'. Do not miss our latest research finding. Get your access to this exclusive report, right here!

 

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. Rahul Goel;

  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;

  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. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 16 Jolly Maker Chambers II, 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



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