BEST ELSS Tax Saver Fund For This March 2024 Tax Benefit

March has started and is the habit with most salaried people a frenzied search on how to save tax through 80B which allows Rs.1.5 lakhs of tax savings by investing various instruments like PF, PPF, five-year tax saving FDs, and ELSS tax saver mutual funds. If you look at the past performance an average ELSS tax-saving mutual fund has done much better than all other tax savings instruments as equity markets in India have shown one of the best performances globally.

So you will be well off considering investing in one such fund if you have a decently long investment horizon of around 5 years or more. There are a large number of tax savings MFs in the market as all fund houses have long-running MFs in this category. Quant MF has also been around for more than 20 years as earlier it was running under the Eicher management before Quant management took over.

So if your objective is long-term capital growth and tax savings you can take a look at this fund. The AUM of the fund is quite large at more than Rs.7000 crores which means that there is little in terms of liquidity or redemption risk. The expense ratio of 0.76% for the direct option is also quite reasonable. The MF is benchmarked against NIFTY TRI 500 which is a broad-based equity benchmark having 500 of the largest market cap companies.

Benefits of Quant ELSS Tax Saver Fund:

• invests in a diversified portfolio of stocks for long-term capital growth.
• Offers tax benefits under Section 80C of the Income Tax Act.
• Minimum investment of Rs.500 and SIPs allowed.

Investment Objective:

• Aims to generate capital appreciation by investing in stocks with growth potential.
• May also provide dividend income.

Performance

The fund performance has been quite stellar at around 35% CAGR over the last 5 years which is a whopping 15% more than the 20% category average. At 35% CAGR, you would be doubling your returns every 2 and a half years. This means if you invested Rs.100 5 years ago this would be now Rs. 400 which is quite impressive. The last year was also a top year with almost 60% return.

Looking at the MF portfolio:

• It has quite a heavy weightage towards large cap at almost 60% followed by around 15% for mid cap and small cap for the rest. This makes it less risky than some of the other quant funds which have heavy small and mid-cap biases
• The fund has almost 27% weightage towards energy followed by 16% to financials, 15% to metals & mining, and 13% to healthcare. The top four sectors make up almost 70% of the overall portfolio
• The top 10 companies have a 60% allocation while the top five companies account for 34% of the overall fund value. There are around 40 stocks in the portfolio.
• Reliance is the largest holding with 10% followed by Adani Power and then Aurobindo. It also has Hindalco and Sun among its top five holdings. Notably, it also has two PSUs GAIL and BHEL
• What is different about Quant is to take some calculated risky bets. This increases volatility but also turbocharges the returns. The fund also has a large number of PSUs like NMDC, SAIL, and LIC which have done exceedingly well. The heavy weightage toward energy and metals is also one of the key outperformance factors.

Alternatives

There are tons of ELSS tax-saving funds from almost every fund house. However, I like the PPFAs Tax Saver who strongly believe and invest in the value style. If you are looking at lower risk steady returns they also may be a good alternative

Summary

Quant ELSS tax saver fund has been the best-performing fund in the last 5 years by a wide margin. The fund has taken well-thought-out bets in sectors like energy, metals, and PSUs which has led to strong outperformance. The massive returns may not happen in the future as the strong Indian equity performance may not take place or Quant manager’s brilliant bets may not turn out as a success. However, this fund should be a strong contender for your picks in the ELSS space.