Franklin India Tax Shield is an open-ended Equity Linked Savings Scheme(ELSS) with the objective to provide medium to long-term capital appreciation along with income tax rebate. Regarded as one of the best ELSS funds, this mutual fund investment is a multi-cap fund and ranked amongst the best performing mutual funds in India. Further, this tax saving mutual fund has been ranked third in the ‘ELSS category’ by CRISIL, for the quarter ended June 2017, a rank which has remained unchanged from the previous quarter.
With ELSS, investors can stand to save taxes as the returns in this mutual fund investment are absolutely tax-free under Sec 80 C of the Income Tax Act 1961. However, this is subjected to a lock-in period of three years. This tax saver mutual fund has been regarded as one of the biggest wealth creators among ELSS funds as it can help create substantial wealth for its investors if they stay invested for a long term. The fund maintains a diversified portfolio of companies, across different sizes and sectors, and was managed by renowned manager, Mr. Anand Radhakrishnan between the period, April 2007 to April 2016. He was joined in February 2011 by another celebrated manager with an exemplary track record, Mr. Anil Prabhudas who ended his association on the 30th of November, 2015. Currently, the fund is helmed by Mr. Lakshmikanth Reddy with Mr. R. Janakiraman co-managing the fund. If you’re looking to make a one-time investment in this fund, the minimum investment required is Rs. 500. Similarly, if you’re planning to opt for SIP Investment, the minimum SIP is Rs. 500 per month as well.
If you analyze this mutual fund investment over a ten year and a five-year period, it has always consistently been ranked amongst the top three funds in its category. Investors looking for tax-free dividends can choose to invest in the dividend option of the scheme. Moreover, the fund’s Dividend Option plan boasts of an excellent dividend pay-out track record as it has regularly paid dividend over the last 10 to 15 years. However, during the last three years, although it still managed to generate an above average return, it has lagged behind. This might also be due to several fundamental changes in the past couple of years such as a change in the management coupled with a tweak in the investment strategy.
Mr. Radhakrishan’s research-intensive approach along with a sound investment strategy over nearly a decade helped it generate desired results. Additionally, under Mr. Radhakrishan, the fund had a penchant for investing in securities with a large-cap bias which had a good track record across market cycles. As a matter of fact, nearly 70 per cent of the stocks in the fund’s portfolio consisted of Large cap stocks while midcap and small-cap securities comprised the remaining 30 per cent. The change in strategy entails that it now employs a more flexicap approach. This strategy basically hands the manager,greater investment choices and diversification possibilities along with the luxury and flexibility to invest in any company without any restrictions on market capitalization either. Currently, the investment strategy has been tailored to match Mr. Reddy’s skillset and investment skills in a bid to capture a wider range of investment opportunities in the fund.
The good news is thateven after this upheaval in team and strategy, Mr. Reddy and the team are more than capable of steering the ship ahead. They have a seemingly good track record in executing the new strategy and there is room for significant improvement going forward. Mr Reddy has shown the potential in his relatively short-term with this fund that he has the shrewd ability to make wise stock picks and generate desired results. We are confident that sooner than later, with the help of strong support from an experienced and stable team along with a innovative flexicap approach, Mr. Reddy will be able to take the fund back to where it belongs, amongst the best in the ELSS category.
This tax saving mutual fund possesses all the ingredients to suit investors with a low-risk appetite. If you’re looking to invest in one of the top performing mutual funds in India which has consistently outperformed the ELSS category in terms of returns, from a risk perspective, do get in touch with our financial advisors for customised investment plans.