How to navigate tax saving mutual funds?
Morningstar India's Kaustubh Belapurkar in conversation with Niraj Shah on 'The Mutual Fund Show'. #NDTVProfitLive
Morningstar India's Kaustubh Belapurkar in conversation with Niraj Shah on 'The Mutual Fund Show'. #NDTVProfitLive
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00:00 Because all through our history, even in the past as Bloomberg, Quint or BQ Prime,
00:04 we used to get in Kostub Belapurkar in the month of January
00:08 to try and tell us which are the funds that one should look at.
00:11 Because frankly, by the time March comes, you are in a hurry, you might make wrong decisions.
00:16 So it's good to know which are these funds that are best placed for tax saving
00:21 in the month of January and start making your plannings right now for the month of March.
00:25 Ideally though, as Kostub would tell you, you should do it from April for the next year.
00:29 Kostub, great having you as always. Thanks for taking the time out and lovely to be doing this again with you.
00:33 Thanks, thanks, Hiraj. I am excited to make my debut on NDDB Profit. Thanks for having me.
00:40 No, the pleasure is ours. So Kostub, just at the start, you would probably advise
00:44 before we get into those funds that don't do this Jan-Feb-March.
00:48 Do it from April as an SIP every month for ease of execution, I presume.
00:53 Yeah, absolutely. I think that's the holy grail to investing, be it in tax saving funds or any other,
00:59 especially on the equity side. Make those consistent investments through SIPs.
01:04 And obviously, we all know that the markets have been in this really good rally.
01:08 And it just helps you avoid that risk of market timing. But yeah, for this financial year,
01:13 even now you can stagger it over the next two or three months. That'll be the best thing to do.
01:18 Come April 24, make sure that you set up that SIP as an ongoing thing for the next financial year.
01:27 OK, OK. So with that as a backdrop, Kostub, I just thought we have about seven or eight minutes
01:33 onto the show, unfortunately. Earnings season issues, so you had to agree with that.
01:38 But be that as it may, let's start off with what are the funds or one by one,
01:43 let's say let's mark three funds, Kostub, if you can, which people can look at and your reasons for the same,
01:48 because that's how we've traditionally done this. And these need not be in order of preference,
01:55 or they could be as well. But let's start off with the first fund on your radar.
01:59 Sure, sure. Thanks, Jeev. So I'm going to very quickly cover off these three funds that we like.
02:05 So first is the Mirai Asset Tax Saver. I think, you know, run by an extremely experienced manager,
02:12 Nilesh Sarana. I think, you know, they've obviously got a very good team set up and Nilesh kind of shepherds this fund himself.
02:19 And I think he, you know, I think the strategy is really the key to the way that, you know,
02:24 the investment philosophy of the fund, what we call growth at a reasonable price.
02:27 So good quality companies, but not paying very excessive valuations.
02:31 I mean, that's, you know, the razor sharp focus that Nilesh brings to the investment process of this fund.
02:37 He is reasonably benchmark aware, you know, in terms of his allocations to sectors, but he'll take pretty active stock bonds and look,
02:45 like I said, for good quality companies with, you know, high ROCs and cash flows.
02:49 And that'll really be the way he will look to invest for, you know, multi years.
02:53 He will build a diversified portfolio. And typically what you see in today's time and age, he's, you know, he's always sectors,
03:01 mostly over it, albeit sectors like basic materials, consumer cyclicals, industrials and finance.
03:07 You know, so I think that's the broad construct of the fund. It's not changed over many, many years, which is great.
03:13 And I think, you know, obviously, you know, it has paid rich dividends for investors in this fund, you know, over the entire time period.
03:20 So that's one fund that we really like in the space. The second fund that we like is the Kotak Tax Saver Fund.
03:27 Now, I think in terms of construct, slightly different, but not polar opposite.
03:34 Obviously, again, a very, very seasoned manager, Harsha Upadhyay, you know, who was the CIO here to kind of manages the strategy.
03:42 Again, he is focusing on kind of growth stocks at reasonable valuations.
03:47 But, you know, again, like Nilesh, he would pay an inordinate amount of attention to the quality of the management
03:55 in terms of the businesses that they're getting into. So, you know, in terms of the capital allocation decisions and all of that,
04:01 they would really look with the fine-toothed needle and form to understand which of the high quality businesses they want to invest into.
04:07 I think this is probably slightly less diversified than the Mirai. Mirai typically runs about 70, 80 stocks.
04:12 This is in the range of 50, 60 stocks. So, I mean, that's a little bit of a nuance that obviously Harsha brings in with his style of management.
04:20 But again, when you look at their top holdings, obviously they're like a lot of banks.
04:25 There's Maruti, which is one of the top holdings, L&T. So, I think it's again geared towards the kind of consumer cyclicals,
04:33 financials and a little bit of industrials overweights that you would see as a part of Harsha's portfolio construct.
04:39 So, I think these are, and again, this is in no specific order, but I thought that'd be a good way to kind of talk about two of the strategies.
04:47 I think the third one, interesting, and it's made a very strong comeback. So, this is the HDFC tax save.
04:53 So, I think it's obviously been run in the HDFC stable for many, many decades now.
05:00 But the manager, which is Roshi Jain, I mean, she's new to the strategy, but she's not new to fund management.
05:06 I mean, she's been managing this strategy for about two years.
05:09 Earlier, she was running similar strategies in Franklin Temperton for many, many years.
05:14 So, again, a very, very seasoned manager. And here, the style is slightly different.
05:18 What Roshi likes to do, I mean, she'll move down the curve a little bit.
05:22 So, while she will be buying both companies, she will also focus a little bit on the value spectrum of,
05:28 and that's something which HDFC as a house also under Prashant Jain's tutelage had really built that up,
05:35 in terms of that focus towards sort of buying or identifying stocks early.
05:40 So, I think Roshi, maybe not as value focused as Prashant, but kind of continues in that vein, in that stable.
05:48 And what you would see is, which has been a style, she likes to run concentrated portfolios.
05:54 So, typically, between 30 to 45 stocks. So, she would take a sizable sector and sort of stock bets.
06:02 So, for instance, right now, the fund is running zero exposure towards basic materials and consumer defensives.
06:09 So, I think when you put all of this into context and really how the fund has shaped up over the last couple of years,
06:16 obviously, with the value bias, it has also helped in terms of more recent performance.
06:21 But I think overall, a very good construct. And when I think about these three funds,
06:25 I mean, they all bring their strengths to the table. Their portfolios, in a way, are reasonably well diversified and unique.
06:32 So, I wouldn't even mind if an investor were to pick a couple of these,
06:37 because the overlap between the portfolios is limited. So, you are kind of diversifying by even buying a couple of ELSS strategies.
06:45 Because remember, it doesn't necessarily only need to be for your tax saving.
06:49 It is a flexi-cap fund, which holds between 60 to 70% in large cap stocks and the remaining in bids and smalls.
06:57 So, it's actually an all-weather portfolio that investors can buy. Mind you, it comes with a 3-year lock-in, which you should be aware of.
07:03 But it also affords you tax benefits under the old tax regime.
07:08 And you can buy more than about that 1.5 lakh limit that's traditionally available, right? Nothing stops you.
07:14 So, I think it's a great space. You have great fund managers, differentiated strategies.
07:21 And I would definitely urge investors to think about it. And like I said, just set up an SIP.
07:26 Continue to invest like you would do with all your other equity investments.
07:31 I'm sure it will be a very, very pleasing sort of outcome for you.
07:34 Kaustubh, if a person wants to put in, let's say, the entire amount in these tax saving funds, would you divvy up between these three, for example?
07:41 Or would you give more weightage to one versus the other, if you will?
07:46 Maybe I'd pick two. So, I spoke about the first two. And again, not playing favorites, but just purely from the context of how these portfolios are structured.
07:56 So, like I said, the HCFC tax saver is slightly different from the other two I mentioned in terms of the portfolio construct.
08:02 So, I might pick one of the first two, the Mirai and the Kotak, and maybe add an HCFC to that,
08:09 because you create diversification between that growth value spectrum, which often gets ignored.
08:17 So, I think that's another way of kind of playing that out.
08:20 So, I would definitely recommend buying all three, but a couple of these, including the HCFC, the ELSS tax saver would be definitely a good idea to think about.
08:29 Yeah, but most importantly, do it for the month of March, if you haven't.
08:34 But start an SIP into that from the month of April, divvy it up over 12, so that it's easy for you when the next season comes. Right?
08:41 Absolutely. Yeah.
08:42 Great. Kaustubh, so good having you. Thank you for giving us this sense and some interesting funds as well to work with.
08:48 Apologies for the truncated show, but like I said, earning season compulsions, so I had to do that. But much appreciate your time.
08:54 Pleasure as always. Thanks, Neeraj.
08:56 Yeah, the pleasure is ours. And viewers, you've got a good sense about tax saving funds.
09:01 So, if tax saving is on your mind for the current financial year, you've got 12 minutes of content with fund recommendations and the rationale why these funds could be interesting.
09:10 I hope this was useful. Thanks so much for tuning in to this leg of the Mutual Fund Show.
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