Though markets are doing well, fund officials say that ELSS may not be an overriding priority for investors.
With equity markets touching new highs and government’s decision to hike the 80 C investment limit for tax benefits to Rs. 1.50 lakh, will ELSS get a higher share of investor’s wallet this year?
With the tax season approaching, we asked fund houses and distributors how they are planning to attract investors in ELSS.
Some fund houses are raising awareness about ELSS through investor awareness programs. Sarath Sarma, Executive Director and Head – Sales, IDBI MF says “Buoyant equity markets has helped the industry in positioning ELSS among investors. Among the 80 C investment options, ELSS comes with the shortest lock in period and thus it is the best option for investors. Our main focus is on investor education programs where we educate investors about the importance of tax saving through 80 C. We don’t advertise our ELSS as we believe reaching out to investors through IAPs is a better option.
Jimmy Patel, Chief Executive Officer, Quantum Mutual Fund says “We are educating investors through our investor awareness programs about the benefits of investing in equities. We tell investors that they should not look at ELSS merely as a tax saving instruments as they also carry risk. They should take a call after looking at fund’s performance and based on their risk taking ability. The optimism surrounding equities has helped ELSS gain some traction this year.”
Some say that the enhanced 80 C limit may not benefit ELSS in a big way. G Pradeepkumar, Chief Executive Officer, Union KBC Mutual Fund says “Yes, the enhanced limit has helped ELSS category, though not in a big way. There are other tax saving instruments like provident fund, insurance, home loan and NSC which compete with ELSS. In today’s age having Rs. 1.5 lakh limit doesn’t really help. It would be better if we have a different limit that is exclusively for ELSS.
Hemant Rustagi of Wiseinvest Advisors says. “ELSS can attract money this year due to buoyant markets.However, people tend to have prior commitments like home loans and insurance premiums. Those who can stomach some risk should definitely consider investing in ELSS.”
Of the Rs. 10.95 lakh crore assets managed by the industry, ELSS accounts for 3% of the industry’s total assets. As on September 2014, there are 51 ELSS schemes which collectively manage Rs. 34,322 crore. The rise in equity markets has helped funds across category, including ELSS. Value Research data shows that ELSS have delivered 59% absolute return over the past one year.
To cash in on investors positive sentiments, some fund houses have launched ELSS in a new avatar. Since SEBI doesn’t allow fund houses to similar schemes, SBI has launched a ten year close ended ELSS called SBI Long Term Advantage Fund – Series I. Sundaram MF too is launching a similar fund called Sundaram Long term Tax advantage Fund (3 years lock in and 10 year tenure).
Apart from ELSS, fund houses are also hopeful of getting investors in RGESS. Recently, fund houses like HDFC, Sundaram and Birla Sun Life have launched RGESS to cash in on the equity boom. Sunil Subramaniam, Deputy Chief Executive Officer, Sundaram Mutual Fund says “Investors are definitely showing interest in ELSS. Looking at the current investor trend, we are launching 2 new funds this month to enable investors to take advantage of tax savings and wealth creation which includes a RGESS.
While fund houses are bullish about the prospects of ELSS, it remains to be seen if the category attracts its rightful share this year.
