Tuesday, January 24, 2012


The Tax Saving Action is in Full Force.
Choose your investments wisely. And move away  from "Tax Saving" mindset to the more efficient "Tax Planning"!!!!
While the options for you are plenty...PPF, Insurance, NPS, etc. it is undoubtedly the Equity Linked Saving Schemes that win hands down.  
Avoid Insurance, expect Term Insurance.....but do consider PPF as they will take care of your Debt exposure.
NPS has a cap of 50% for equity exposure and hence is not recommended by me.

Yes, ELSS continues to the BEST option for your Tax Saving under Section 80C.
Before reading further I strongly recommend you to read....

Among the Equity Linked Savings Schemes, I have been a favourite of Religare Tax Plan since its inception in December 2006. Not without reason too as  the Fund has truly been impressive both in bull and bear phases.
Religare Tax Plan is among the more 'aggressive' of the ELSS umbrella. However this mid cap exposure has not done any harm to the Fund's performance even in Bear Markets, which is truly remarkable.
The Fund tends to stay fully invested and avoid Cash calls....the 3 year mandatory lock-in period obviously helps.
The stock selection is very active and the top ten holdings have seen regular changes.
But the churning has not affected the Funds performance. The Focus on Bottom up stock picking and the avoidance of Cyclical plays have been the reason for its consistency.
Fund Manager Vetri Subramaniam and Vinay Paharia have largely restricted exposure to Large Cap ...in fact at one point of time, the Large Cap exposure of Religare Tax Plan was below 25%...
The Fund has reasonable diversification and does not shy away from booking profits.
The fund has also given 4 Dividends in the last 4 years.
The Fund has consistently beaten its Benchmark throughout its tenure and by a fair margin.
The Fund corpus is 109 crores which is a cause of concern but the consistently strong performance has managed to soothe the concerns.
Once the Direct Tax Code kicks in, the ELSS may become defunct as an investment alternative...make the maximum use of it till then.
If you are aggressive investor and would not mind volatility then Religare Tax Plan is the one for you.
You can also have a look at Taurus Tax Shield, though the Asset Size of only 65 crores is a cause of concern.
Other investors should seriously look at Canara Robecco Equity Tax Saver, HDFC Tax Saver, Kotak Tax Saver, Fidelity Tax Advantage among others.
Best of luck,
Srikanth Matrubai

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Monday, January 2, 2012

Which Large cap for sip investment??

    A client is confused as to which Large cap he should go for……

Mr.Vijay Sampath wrote :
“Hello Sir, I like your blog for its easy language. Sir, I want to invest in an Large Cap Fund through Sip.
I have zeroed in on Kotak Opportunities Fund and IDFC Imperial Equity Fund, which one would you suggest?”. 

Hi Vijay,
It is good that you have decided to take the sip to investing which is the BEST way to invest as it helps in averaging your costs and help in accumulating corpus with even small sums every month. 

“Opportunity Funds”, as the name suggests are flexible and try to benefit from attractive opportunites that the market keeps throwing up every now and then. 
Kotak Opportunities Fund relies on combining top-down and bottom-up approaches. Kotak Opportunities Fund is an aggressive diversified scheme which invests a minimum of 60% of its corpus in large cap stocks and remaining in mid-cap stocks.

Kotak Opportunities Fund actively mixes up its portfolio and appears to book profits as and when the opportunity arises. Given this active portfolio management combined with a strategy to actively shift across sector and market caps, the fund would be more suitable for aggressive investors. It should not be the only fund in your portfolio, but rather an addition to perk up returns. 

Now, coming to whether Kotak Opportunities Fund is better or IDFC Premier Equity Fund…………………
Actually the comparision itself is wrong as Kotak Opportunities Fund is more concentrated towards Large caps whereas IDFC Premier Equity Fund is more of a Mid and small cap play.
Kotak has almost 60% in Large Cap whereas IDFC Premier Equity fund has only 6% in Large caps.
It would be more acceptable when Kotak Opportunities fund is compared with IDFC Imperial Equity Fund, which has a high concentration of Large caps.  

Now look at the comparison and take a decision. 

Kotak Opportunities Fund has scored over the IDFC Imperial Equity Fund over 3 year period giving 17.83% v/s 15.22% and both have given similar returns over 5 year period.
On Expenses Front, IDFC Imperial Equity Fund has an expense ratio of 2.29% whereas Kotak Opportunities has a lower expense at 2.05%
Cyclical Holdings :
Here too, Kotak Opportunities Fund scores over IDFC Imperial Equity Fund because Kotak has a lesser %age of cyclical stocks at 43% whereas IDFC  has a rather uneasy 64%…

Cash :
Kotak tends to have a cash holding ranging between 6% to 8% whereas at IDFC the cash holding has always been on the higher side at 15% to 20%. I personally feel that the falling markets has helped IDFC because it tends to have a larger portion in Cash…but going forward this could turn against the Fund.
However, on the risk taken to generate returns IDFC scores over Kotak. 
Even if we compare Kotak Opportunities Fund with IDFC Premier Equity fund, during the last 3 year period, IDFC Permier  Equity returned an annualized 7.58% while Kotak Opportunities delivered 7.60%. Both funds beat the benchmark BSE 100 index (return: 3.75% annualized) comprehensively over the same timeframe.

Calendar Year
The performance figures in the table above are calculated using NAV, assuming Growth option. Performance figures of over 1 year are annualised.(Eg. A 33.1% gain in 3 years works out to a 10% gain per year when annualised.)    
3 yr Annualised Volatility
3 yr Sharpe ratio


I certainly feel that Kotak Opportunity Fund can add significant value to your portfolio over the long term especially via SIPs. 
Note : I have given the comparison only for the two funds you have specifically asked about, this is not to say that Kotak Opportunities Fund is the BEST Large cap. For the answer to that, keep visiting my blog. 
Srikanth Matrubai

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