Reliance Tax Saver (ELSS) Fund has a corpus of Rs 10,511 crore, making it second only in size to Axis Long Term Equity in the ELSS category which has a corpus of Rs 17,263 crore. As of 4th June 2018, it had a one year return of just 0.81% and three-year returns of 6.32% (CAGR). These returns are below Nifty 100 returns as well as those of several peers. Its Value Research rating has dropped to two stars.
The fund uses the S&P BSE 100 as its benchmark and has provided returns as of April 30th on its website. The website shows one and three-year returns at 8.56% and 9.21% respectively compared to 16.75% and 11.80% for the S&P BSE 100 (Total Returns Index). In other words, both figures indicate that the fund has underperformed.
The Nifty 100 has delivered a return of 11.15% over the past year and 9.03% over the past three years compared to 0.81% and 6.32% for the fund. The contrast between Reliance Tax Saver and its larger counterpart, Axis Long Term Equity, is also jarring. Axis Long Term Equity has delivered a one year return of 20.07% and three-year CAGR of 12.26% despite having a 70% larger fund. Aditya Birla Sun Life Tax Relief, another giant ELSS fund, has delivered 17.06% and 13.5% over one and three years respectively.
A look at Reliance Tax Saver’s portfolio shows a heavy allocation towards SBI (8.65%), followed by Tata Steel (7.49%) and Tata Motors (6.59%). SBI has been a poor performer of late announcing a loss of Rs 7,748 crore in the fourth quarter of FY 18 as a result of non-performing assets (NPAs). Tata Motors has struggled with domestic sales, relying heavily on Jaguar Land Rover, its overseas subsidiary. Axis Long Term Equity, by contrast, has TCS, HDFC Bank and Kotak Mahindra Bank as its top three holdings. TCS recently broke records to achieve a $100 billion market cap.
Longer-Term Performance Intact
Reliance Tax Saver has five-year returns of 19.74% and 10-year returns of 14.48%. Both of these figures are above the benchmark Nifty 100 returns of 13.23% and 8.95% respectively. Its fund manager, Ashwani Kumar has been in place since 2005 and hence there is no disruption with the fund’s management.
ELSS funds have a three-year lock-in. However, they are equity funds at the end of the day and investors should approach them with a longer time horizon of at least five years. This makes performance over long time periods more important than short-term performance. That said, the fund may not be able to rest on its past laurels indefinitely. It must pull up its socks and perform.
Data source: Value Research as of 4th June 2018. All figures for Regular Plans