Despite the volatility in market, fund houses are optimistic of getting healthy inflows in ELSS this tax season. While the market has disappointed investors last year, investors who invested in ELSS three years back have made handsome returns and this will attract investors in ELSS this year too, say fund officials. Value Research data shows that ELSS category has delivered 15% and 11% CAGR over a three and five year period.
Top five ELSS funds in terms of AUM
|
Scheme |
CAGR return since launch |
AUM Dec 2015 |
|
Axis Long Term Equity Fund |
19% |
6,867 |
|
HDFC Taxsaver Fund |
27% |
4,793 |
|
SBI Magnum Taxgain Scheme |
17% |
4,699 |
|
Reliance Tax Saver Fund |
15% |
4,605 |
|
ICICI Prudential Long Term Equity Fund |
22% |
2,885 |
|
Source: Value Research Rs. cr. |
||
Fund houses have seen good response to ELSS this year. “There is reasonable demand for ELSS given the long term track record of the category. A very healthy sign that we are witnessing over the past one year is that more retail investors are investing in equities through the mutual fund route. Given that ELSS offers twin benefits of wealth creation over long period and tax savings, investors are choosing this as their first investment choice,” says Raghav Iyengar - Executive Vice President & Head of Retail & Institutional Business, ICICI Prudential Mutual Fund.
In fact, the recent correction in market has come as a good opportunity for investors to invest in ELSS. “The recent volatility will not have any negative impact on the inflows in this category as investors come with a longer term horizon. In fact, the recent correction provides a good opportunity for investors to invest in ELSS,” says Dinesh Khara, MD & CEO, SBI Mutual Fund.
Also, fund officials say that ELSS is market agnostic, which means that investors rush to invest in this category at the last minute, irrespective of the volatility in the market. “ELSS is insulated to markets since a lot of investors rush to invest in January to save tax. While the short term negative returns can be unnerving for investors, they have realized that this is a long term product. Thus, we have not seen any significant drop in inflows in our tax saving fund,” says Samant Sikka, Head - Business Development, Axis Mutual Fund.
Investing regularly through SIPs is the most convenient way for investors to avoid last minute rush to save tax, say distributors. “We recommend starting SIPs in ELSS at the start of the year. If they want to invest lump sum we park some money in liquid funds and switch to ELSS when markets correct,” says Nikhil Kothari of Etica Wealth Management.
So how do you go about recommending the right ELSS scheme? Nikhil says that he avoids recommending funds having mid and small cap bias since clients generally look for risk-adjusted returns. “We recommend funds having a large cap bias because clients are looking for stability. If clients have a higher risk appetite they can go for ELSS having mid cap exposure,” he adds.
Bengaluru based advisor Srikant Matrubai says “My business in ELSS has increased as compared to last year. I show the benefits of investing in ELSS by comparing it with other competing products. This helps investors get a clear idea about the ELSS advantage.”
Meanwhile, to cash in on the tax saving season, DHFL Pramerica, Mirae Asset and Peerless launched ELSS funds last December. The ELSS category manages Rs. 41,100 crore, which is 3% of the total AUM of the industry as on December 2015.
