An open-ended equity linked savings fund offering tax benefit under Section 80C of the Income Tax Act

Summary

Investment Objective*

The investment objective of the Scheme is to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related Securities. The scheme shall offer tax benefits under Section 80C of the Income Tax Act.

However, there can be no assurance that the investment objectives of the scheme will be realized and the scheme does not assure or guarantee any returns.

*Source: Scheme Information Document

Is this fund for you?

The Indiabulls Tax Savings Fund (ITSF) is an Equity Linked Saving Scheme (ELSS) from the stable of Indiabulls mutual fund. Tax Saving Funds or ELSS (Equity Linked Savings Scheme) are diversified equity mutual funds that provides tax deduction under Section 80C of the Income Tax Act, 1961 upto a sum of Rs 1.5 lakh.

ELSSs are one of the best tax-saving market-linked investments avenues that come with lock-in period of 3 years (which is the lowest among other tax-saving avenues). Lock-in refer to your investment in these funds cannot be withdrawn before completion of 3 years from the date of your investment.

Besides the tax break, many ELSS have delivered healthy double-digit returns over the long term due to the aggressive equity allocation. However, when investing in ELSS it is sensible to have at least a five-year investment horizon. However, choosing the right scheme is equally important. ITSF will invest across the market capitalization with no sector bias and will look for companies with promising future growth potential. A bottom-up approach for stock picking will be followed.

ITSF is suitable for investors with a high-risk appetite —meaning those who can assume high risk in an anticipation of high returns in future. However, having an investment horizon of 5 years is essential.

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How will the fund allocate its assets?

The asset allocation under normal circumstances will be as under:

Further it is stated in the offer document that:

• The cumulative gross exposure through equity, debt and derivative positions will not exceed 100% of the net assets of the scheme.
• The Scheme will not write options or purchase instruments with embedded written options.
• The total exposure related to option premium paid will not exceed 20% of the net assets of the scheme.
• Cash or cash equivalents with residual maturity of less than 91 days will be treated as not creating any exposure.
• Any derivative instrument used to hedge has the same underlying security as the existing position being hedged.
• The quantity of underlying associated with the derivative position taken for hedging purposes does not exceed the quantity of the existing position against which hedge has been taken.
• The Scheme may enter into plain vanilla interest rate swaps for hedging purposes.

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What investment strategies will the fund follow?

ITSF will follow an active investment strategy by taking defensive/ aggressive calls depending on all the opportunities available at different points of time.

Being an ELSS fund , ITSF is mandated to invest minimum 80% of its net assets in equity and equity related services. The scheme aims to have a reasonably well diversified portfolio without being overly diversified. It has the flexibility to invest across the market capitalisations (large-cap, mid-cap and small-cap) without any sector bias.

ITSF will follow a bottom-up approach for stock selection based on individual company’s attributes over the other macro-economic conditions. The AMC will conduct in-house research to identify investible ideas. It will evaluate the stocks on the basis of their fundamental values such as assess industry and company fundamentals, robustness of business model, sustainability of moat, valuations, quality of management, corporate governance standards etc.

The scheme may even enter into derivatives in line with the guidelines prescribed by SEBI from time to time. The exposure limit per scrip/instrument shall be to the extent permitted by the SEBI Regulation for the time being in force.

Further, to protect investors the scheme may invest in Money Market Instruments and Fixed Deposits of Scheduled Banks.

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Fund Manager Profile

The fund will be jointly managed by Mr Sumit Bhatnagar and Mr Malay Shah.

Mr Sumit Bhatnagar is Head of Equity (For Domestic Equity Segment) at Indiabulls Asset Management Company. He has been associated with Indiabulls since February 2009. He is a post-graduate from University of Toronto and CFA Charter holder. He has around 15 years of experience in Banking & Capital Markets. Prior to joining Indiabulls, he has worked with SEBI for close to 4.5 years in Investment Management Department. He has also worked in Banking Industry in retail and corporate assets.

He also manages: Indiabulls Blue Chip Fund, Indiabulls Arbitrage Fund, Indiabulls Value Discovery Fund and Indiabulls Monthly Income Plan

Mr Malay Shah is Head Fixed Income (For Debt Segment) at Indiabulls Asset Management Company. He has over 15 years of experience in the finance industry with an exposure to Debt – Dealing and Fund Management. Prior to joining Indiabulls Mutual Fund, he was working as the Head – Fixed Income with Peerless Funds Management Co. Ltd, managing all the debt Schemes. Mr Shah has earned a MMS in Finance and is a graduate in Commerce (B. Com).

He is currently also managing: Indiabulls Arbitrage Fund, Indiabulls Value Discovery Fund, Indiabulls Monthly Income Plan, Indiabulls Liquid Fund, Indiabulls Ultra Short Term Fund, Indiabulls Short Term Fund, Indiabulls Income Fund and Indiabulls Gilt Fund

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Fund Outlook

On evaluating the fund’s objective and investment strategy, it is clear that ITSF will have major exposure to equity and equity related instruments. Hence, the fortune of the fund is dependent how the market forces are at play.

Moody’s, an international rating agency, has upgraded India's local and foreign currency issuer ratings to Baa2 (with stable outlook) from Baa3 (with a positive outlook). While this will add to positive sentiments, the adverse undercurrents remain, mainly: flagging economic growth, rising crude oil prices, inflationary concerns (which could preclude RBI from reducing rates), widening trade deficit, vulnerable rupee, rising bond yields, and potential fiscal slippages.

Moreover, there’s discontent post-demonetisation and after shoddy implementation of GST. We fear that Rs 6.92 lakh crore road plan (BharatMala Pariyojana to construct 34,800 km of highways) plus Rs 2.11 lakh crore for bank recapitalization (attempted at reinvigorate economic growth) could result in fiscal slippages, given the mammoth of expenditure.

Corporate earnings have been mix …and the counters that have posted good numbers need to display persistency.

Also, the slowdown in consumption (due to cash crunch, loss of jobs–especially in the unorganised sector, diminutive rise in salaries, slower employment growth and rural distress) when read with the investment growth number, highlights the negative output gap that exists in the Indian economy.

Growth in consumption and investment activity will be pivotal for India’s economic growth. It is important for these activities to go up, while the Government expenditure is increasing at a healthy pace. Currently, it is only the Government spending that’s propping up GDP growth rate and managing to offset the impact of demonetisation to an extent. As highlighted in the earlier section, private investments have grown at a dismal pace. And a vital point to note is, the overall economic growth may not sustain without pick up in investment activity (which is hinged on internal and external factors).

Global cues – The US–North Korea geopolitical tensions, rising international oil prices, possibility normalisation of interest rates by Federal Reserve; are factors that pose a risk for the Indian capital market.

Hence, in the aforesaid scenario, the performance of the fund will be closely linked to how astutely the fund manager constructs its portfolio amidst time when valuations too seem grossly stretched.

Hence, Indiabulls Tax Savings Fund is expected to carry high risk while achieving its investment objective.

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DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr. Ajit Dayal with an objective of providing value-based information / views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

‘PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, it subsidiaries and its Directors.

Terms and condition on which its offer research report
For the terms and condition for research report click here.

Details of associates

1. Money Simplified Services Limited;
2. PersonalFN Insurance Services India Limited ;
3. Equitymaster Agora Research Private Limited;
4. Common Sense Living Private Limited;
5. Quantum Advisors Private Limited;
6. Quantum Asset Management Company Private Limited;
7. HelpYourNGO Private Limited;
8. HelpYourNGO Foundation;
9. Natural Streets for Performing Arts Foundation;
10. Primary Real Estate Advisors Private Limited;
11. Rahul Goel;
12. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
 

1. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company, except QIS receives fees for providing research to Quantum Equity Fund of Fund (QEFoF) which is Fund of Fund scheme managed by QMF and our associates has financial interest in the subject company.
2. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report.
3. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront /annualized & trail), if any, for any Schemes by QMF to QIS is also at arm's length and as per prevailing market practices.
    

Disclosure with regard to receipt of Compensation

1. Neither QIS nor it's Associates have any compensation from the subject Company in the past twelve months.
2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company in the past twelve months.
3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company in the past twelve months.
4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months, except that QIS had receive fees for services under sponsorship agreement from Franklin Templeton Asset Management India Pvt. Ltd.
5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report
    

General disclosure

1. The Research Analyst has not served as an officer, director or employee of the subject Company.
2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.
    

Subject Company means Mutual Fund Schemes

Quantum Information Services Pvt. Ltd. 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021. Tel: +91 22 6136 1200
Website : www.personalfn.com CIN: U65990MH1989PTC054667

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Quantum Information Services Pvt. Ltd. Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021. Email: info@personalfn.com CIN: U65990MH1989PTC054667

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