Mirae Asset ELSS Tax Saver Fund -Direct Plan-Payout of Income Distribution cum capital withdrawal INF769K01DN7

The investment philosophy is built on three core principles: quality businesses with stable earnings, strong management, and attractive valuation. The process includes both quantitative and qualitative stock screening with bottom-up stock-picking.

The sector selection is done through a top-down approach mainly based on growth prospects. Analysts assess stocks at the industry and company levels and focus on key drivers such as returns on capital employed, returns on equity, and EBITDA margin. Within the framework, there is a lot of emphasis on qualitative analyses like management quality and execution capabilities. These are quantified by evaluating the trailing 10-year track record, which helps in removing subjectivity.

While selecting mid-cap stocks, the manager typically looks for slightly higher return on equity and growth rates as compared with large-cap stocks, given these stocks come with liquidity and other risks. There is a further focus on valuation, which becomes a key driver behind entry and exit timing. This valuation process along with quant factors drive the conviction level in the stock, which helps to exclude companies where business fundamentals are not solid. Meeting with company management is vital here to gain company-specific and industry information. The strategy holds a well-diversified portfolio with a long-term perspective, helping the fund outperform over the long haul.

The fund’s strategy is to invest across sectors and themes. It has traditionally held a significant stake of around 70%-80% in large companies, focusing primarily on high-growth stocks at reasonable price. It has a well-diversified portfolio, free from a strong bias to any particular sector and without excessive exposure to a single stock. Neelesh Surana does not deviate significantly in terms of sector weightings relative to the benchmark.

The fund upholds a diversified portfolio, typically 65-70 equities, thereby mitigating concentration and liquidity risks. The top 10 stocks in the portfolio account for nearly 45% of the total assets. Large-cap companies such as HDFC Bank, ICICI Bank, Larsen & Toubro, Reliance Industries, and State Bank of India are among its top positions. Many of these stocks have been among the fund's top holdings for more than three years.

Alpha is generated mainly through stock selection rather than sector rotation. The most-favored sectors in the past year have been financial services (average exposure of about 35%), consumer cyclicals, IT, and industrials.

The portfolio manager is willing to ride through periods of adversity and stick to his long-term views, exhibiting patience and conviction in his holdings. Taking cash calls is not part of the strategy. Given the manager’s focus on companies with high cash flows and high return on equity, he has consistently remained underweight in real estate, infrastructure, and construction companies as these businesses typically don't have these traits.