IDFC Tax Advantage (ELSS) Fund invests into good businesses which are:

Ø  Monopolistic in nature:

The fund invests into monopolistic businesses, where the competition is limited. A monopolistic business prevents increased competition or fragmentation of the industry. This helps the company maintain profitability through a cycle.

Ø  The company is a leader or a challenger in its space:

Such businesses benefit both in a down cycle as well as up cycle. In a down cycle, they are able to maintain pricing power better than competition and hence margin dilution is lower. As a alternate strategy, they can gain market share by dropping margins. In an upcycle, they are able to raise prices and still maintain market share.

Ø  Clean/ unlevered balance sheet to participate in growth:

The philosophy of the fund is to play operating leverage rather than financial leverage where ever possible. Clean balance sheets/ positive cash flows reduce the risk of bankruptcy, especially in a down turn. These companies also have the capacity to leverage their balance sheets in an up cycle.