Skip to main content

Kotak Tax Saver

Call 0 94 8300 8300 (India)

Tax-saving funds (also referred to as Equity Linked Savings Schemes - ELSS) are well suited for investors willing to take risk. However, at the same time it also provides an opportunity to create wealth in one's tax-saving portfolio. Moreover, the lock-in period of 3 Years encourages long-term investing, which is a pre-requisite for fruitful return on equity investments. A well managed tax-saving fund can serve a dual purpose i.e. provide tax benefits (under Section 80C of the Income Tax Act, 1961) and assist investors' to accumulate wealth over the long-term. But to do so, the key lies in selecting a well-managed tax-saving fund with a long term horizon.

Kotak Tax Saver (KTS) is one such open-ended tax saving fund from the stable of Kotak Mutual Fund. KTS is primarily mandated to invest in equities and equity-related securities of Indian companies along with debt and money market instruments. Launched in November 2005, the fund has been in existence for more than 6 years now.

                                            

Investment Objective and Proposition

The fund's primary investment objective is "to generate long-term capital appreciation from a diversified portfolio of equity and equity related securities and enable investors to avail the income tax rebate, as permitted from time to time. There is no assurance that the investment objective of the Scheme will be achieved."

The fund is mandated to invest 80% - 100% of its total assets in equity and equity-related securities and the rest (upto 20%) in domestic debt and money market instruments to manage its liquidity requirements.

Over the past one year, KTS's exposure to large cap stocks has been in the range of 63% - 72%, while its exposure to mid & small cap stocks has ranged from of 25% - 34%. The fund's exposure to debt and cash over the past one year has never been more than 10% which indicates its tilt towards staying invested in equities with occasional cash calls. As per the portfolio disclosed on January 31, 2012, the fund has allocated 64.6% to large caps while its investment in mid & small caps stands at 28.3% and exposure to cash has been petite 7.1%.

Equity Portfolio

Holdings

Sep 2011

Oct 2011

Nov 2011

Dec 2011

Jan 2012

ICICI Bank Ltd.

4.8

4.9

5.2

5.7

6.2

Infosys Ltd.

6.1

5.6

5.5

6.2

6.0

Reliance Industries Ltd.

5.0

5.2

5.4

5.7

5.4

HDFC Bank Ltd.

5.8

4.8

4.2

4.3

4.4

ITC Ltd.

4.3

4.1

4.2

3.5

4.2

State Bank Of India.

3.8

4.2

3.9

3.2

3.7

Oil & Natural Gas Corpn. Ltd.

2.7

2.9

3.1

3.2

2.8

Bharti Airtel Ltd.

3.2

3.2

2.9

2.7

2.6

Tata Consultancy Services Ltd.

3.5

3.1

3.3

3.0

2.3

NTPC Ltd.

-

-

-

2.1

2.0

 

As indicated by the table above, KTS's top-10 equity portfolio constitutes of all 'A' group stocks. As on January 31, 2012 the fund held in all 62 stocks in portfolio out of which 'A' group stocks accounted for 75.8% and the rest 24.2% were the 'B' group ones. The fund holds a portfolio which is diversified across sectors and stocks. The top-10 stocks accounted for 39.7% of the portfolio while Top-5 sector concentration stood at 44.3% for its recent portfolio (i.e. as January 31, 2012). Being benchmarked against S&P CNX 500, the fund manager has moderately churned the portfolio as revealed by its portfolio turnover ratio of 1.35 times.

The fund uses the bottom up approach for construction of the portfolio. Although the fund manager has the freedom to invest across market capitalisations; a significant part of the scheme is invested in large cap stocks as a part of risk mitigation process. Following the blend style (i.e. a combination of growth and value) of investing; the fund invests in stocks that are priced at a material discount to their intrinsic value. Such intrinsic value is a function of both past performance and future growth prospects. Stocks are filtered on the following considerations:

 

·         The financial strength of the companies, as indicated by well recognised financial parameters;

·         Reputation of the management and track record;

·         Companies that are relatively less prone to recessions or cycles, either because of the nature of their businesses or superior strategies followed by their management;

·         Companies which pursue a strategy to build strong brands for their products or services and those which are capable of building strong franchises;

·         Market liquidity of the stock.

How KTS has fared vis-à-vis its peers?

Scheme Name

6-Mth (%)

1-Yr (%)

3-Yr (%)

5-Yr (%)

Std. Dev. (%)

Sharpe Ratio

HDFC TaxSaver (G)

5.1

1.2

35.4

10.0

7.09

0.30

Sahara Tax Gain (G)

4.8

4.6

32.2

12.8

7.82

0.26

Religare Tax Plan (G)

2.3

4.1

31.0

12.9

6.58

0.28

DSPBR Tax Saver (G)

5.8

-1.1

29.3

10.2

7.34

0.23

SBI Magnum TaxGain'93 (G)

8.2

3.0

26.5

-

7.37

0.21

Kotak Tax Saver (G)

7.1

0.1

26.4

4.17

7.76

0.20

S&P CNX 500

7.8

-0.4

27.0

5.9

8.16

0.20

 

The table above reveals that KTS's performance has not been very luring when compared to top performers in the category. Moreover, the fund has underperformed the benchmark index – S&P CNX 500 across time frames. It has clocked returns of 26.4% CAGR over the 3-Yr as against the 27.0% CAGR returns generated by S&P CNX 500 over the same time frame.

When assessed on the volatility front, KTS has exposed its investor to lower risk (as revealed by its Standard Deviation of 7.76% which is lower than that of its benchmark), and has been partially successful in clocking attractive risk-adjusted returns (as revealed by its Sharpe Ratio of 0.20 which is at par with the Sharpe ratio of its benchmark). However the Sharpe ratio of KTS looks average when compared with that of some of the top performers in the category. This makes it a low risk- medium return investment proposition as compared to its peers.

Fund Manager Profile

Name of the Fund Manager

Mr Pankaj Tibrewal

Mr Krishna Sanghvi

Total Work Experience

Over 6 years

Over 13 years

Managing the fund since

Jan-10

May-10

Qualifications

B.Com, Masters in Finance (MU-UK)

BCom., CWA(ICWA), MBA (NMIMS)

As seen above the performance of Kotak Tax Saver has been average. Over a 3-Yr time frame, the returns are mediocre as the fund fails to match even the category average returns.

KTS has managed the risk well by being less volatile than its benchmark. However, the returns generated by the fund look rather dull when compared with those generated by some of its category peers. Its Sharpe ratio too looks average against that of its category peers. This makes it an average performer.

ELSS mutual funds can provide you with an excellent wealth creation avenue, apart from helping you avail the tax deductions. However, the investment in ELSS doesn't come without risk and hence requires your attention at the time of selection of the fund. Investment done without proper assessment may prove to be a blunder if your selection goes wrong. Thorough research of available options may help you take a well informed decision. 

-----------------------------

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1.      ICICI Prudential Tax Plan  Invest Online

2.      HDFC TaxSaver   Invest Online

3.      DSP BlackRock Tax Saver Fund   Invest Online

4.      Birla Sun Life Tax Relief '96 Invest Online

5.      Reliance Tax Saver (ELSS) Fund   Invest Online

6.      IDFC Tax Advantage (ELSS) Fund  Invest Online

7.      SBI Magnum Tax Gain Scheme 1993   Invest Online

8.      Sundaram Tax Saver   Invest Online

 

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

Popular posts from this blog

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...

Sundaram Mutual Fund new plan Sundaram Fixed Term Plan CJ

Sundaram Mutual Fund has announced the launch of a new fund named as Sundaram Fixed Term Plan CJ. The new issue will be closed for subscription on January 30. --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.   Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   These Application Forms can be used for buying regular mutual funds also   Some of the best Tax Saving Mutual Funds available are: 1. HDFC TaxSaver 2. ICICI Prudential Tax Plan 3. DSP BlackRock Tax Saver Fund 4. Birla Sun Life Tax Relief '96 5. Reliance Tax Saver (ELSS) Fund 6. IDFC Tax Advantage (ELSS) Fund 7. SBI Magnum Tax Gain Scheme 1993 8. Sundaram Tax Saver   -...

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...

Commercial Paper (CP)

Invest Mutual Funds Online Download Mutual Fund Application Forms Commercial Paper (CP): These are issued by corporate entities in denominations of Rs.2.5mn and usually have a maturity of 90 days. CPs can also be issued for maturity periods of 180 and one year but the most active market is for 90 day CPs.   Two key regulations govern the issuance of CPs-firstly, CPs have to be compulsorily rated by a recognized credit rating agency and only those companies can issue CPs which have a short term rating of at least P1. Secondly, funds raised through CPs do not represent fresh borrowings for the corporate issuer but merely substitute a part of the banking limits available to it. Hence, a company issues CPs almost always to save on interest costs ie it will issue CPs only when the environment is such that CP issuance will be at rates lower than the rate at which it borrows money from its banking consortium. ----------------------...

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now