Reliance Tax Saver Fund
- Investment Style: Large Growth
- Investment Process: A concentrated fund that can vary its exposure across market caps
- Fund Manager: Ashwani Kumar
This fund is run by a long-standing manager and is distinct in terms of character.
While most ELSS funds maintain a multi-cap portfolio with a significant allocation towards large-cap stocks, Kumar can tend to invest substantially in small/mid-caps based on his conviction levels. Further, he runs a concentrated portfolio and can tend to invest in slightly less-liquid securities, given the 3-year lock-in period.
While picking stocks, Kumar typically seeks companies with strong growth prospects that he believes are trading at a discount to their intrinsic value. In effect, he attempts to balance both the growth and valuation aspects while investing. It comes as no surprise that this approach has led him to invest in the small/mid-cap space where markets tend to misprice stocks due to low coverage. When building the portfolio, Kumar typically takes sizable underweight/overweight positions versus the S&P BSE 100 Index and the Morningstar Category based on his conviction.
Clearly, the unconstrained approach provides the manager adequate flexibility to choose stocks and sectors from across the board. However, such a strategy’s success relies heavily on the portfolio manager’s ability to execute it skillfully.
The fund can tend to be driven by market cyclicality and outperform significantly in a mid-cap rally owing to its exposure in this segment. Having said that, the current portfolio reflects a higher allocation to large-cap stocks than it did prior to 2014. We are of the view that Kumar is far more adept at operating in the large-cap space rather than in small/mid-caps.
The fund’s blistering showing in 2012 and 2014 shows what it is capable of accomplishing when things fall into place. Overall we have a positive opinion on the fund
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