Axis Taxsaver looks to be fully geared up to beat the tough competition in the ELSS category this season
IT IS tax-saving season once again with investors doing their last minute check for various tax-saving avenues to a bit of their hard-earned money. Among many other options, tax-saving mutual fund schemes (ELSS) is gradually emerging as a popular investment avenue for most investors.
While there are already quite a few number of well-established ELSS in the market, some of the new launches have emerged as tough competitors to the existing schemes. Launched in December 2009, Axis Taxsaver appears to be fully geared up to beat the tough competition in the ELSS category of mutual fund schemes this season.
PERFORMANCE:
Being just about a year old, there is not much to comment about the fund's performance. However, in its very first year, the fund has put up a relatively sound show. It made a decent 30% gain last year despite the markets being at their volatile best. The Sensex and the Nifty returned just about 18% gains each, respectively, last year while the average returns by the category of ELSS were just about 19%.
The scheme's benchmark — BSE 200 registered about 17% gains in 2010. Axis Taxsaver thus turned out to be the finest ELSS performer last year.
This year, so far, has been pretty ordinary for the markets with major market indices returning single-digit negative returns. The Sensex, the Nifty and the BSE 200 have recorded negative returns of over 8% so far while Axis Taxsaver has returned about negative 7% since the beginning of the current calendar year.
PORTFOLIO:
Axis Taxsaver has grown from less than 1 crore of assets under management (AUM) at the time of its launch to nearly 50 crore today. This AUM is, however, pretty insignificant when compared with other well-established schemes of the category. As such, very few ELSS mutual funds have been successful in accumulating over 1,000 crore of AUM as investors are pretty cautious before choosing an ELSS investment given the mandatory three-year lockin period.
Despite such a petty asset base of less than 50 crore, its equity portfolio is extremely diversified. The fund's portfolio comprises of nearly 45 scrips, which considerably dilute its risk per stock. Again, while the fund incorporates both large and mid-cap stocks in its kitty, it is clearly biased towards blue-chip stocks which make the fund a suitable investment with moderate risk appetite.
As far as the fund's profitability quotient is concerned, nearly 73% of its equity portfolio is quoting a notional profit that includes stocks like SpiceJet, HDFC Bank, ICICI Bank, SBI, Agro Tech Foods, Cummins India, Infosys and TCS among others. The fund's bias towards financial services sector is clearly evident and of late, it has also included Bank of Baroda and Punjab National Bank taking its total exposure to financial services space to more than 28% of its equity holding.
However, as rising interest rates and tightening liquidity conditions are building pressure on the performance of the banking sector, the fund may have to reconsider its strategy of maintaining such a high exposure to this sector.
OUR VIEW:
Notwithstanding its impressive performance in the very first year of its launch, the fact that Axis Taxsaver is just about a year old in the industry signals a cautious approach by investors before making an investment decision, for even if the fund fails to perform in future, investors will be compelled to stay invested for at least three years.
Again, while the scheme's portfolio is considerably well diversified, such an extreme diversification not only increases the efforts of the fund manager to keep track of such large number of stock holdings, but also raises the cost of managing such a huge portfolio. It thus remains to be seen how the fund is able to synchronise the cost and performance in the near term. But there is no denying that Axis Taxsaver has made a promising start and is the one to watch out for in the tax saving category.
