MFs all set to use equity-linked schemes as spring-board

MFs all set to use equity-linked schemes as spring-board

New Delhi: The mutual fund industry may have seen a dull period with the economic downturn keeping it away from any action, but a host of popular tax saving schemes are awaiting Sebi approval to kickstart the year with a new vigour.

ELSS (Equity-linked Saving Scheme), as commonly known, have been a popular instrument in volatile markets among tax savers, since investment in them up to a maximum of Rs1 lakh is tax free and with the three year lock-in period, they more or less cushion one from current turbulence.

Unlike the trend so far, the mutual funds began rallying for ELSS much earlier this year. Besides, the number of applications filed this year is also much higher than those in the past few years.

Among a few new funds awaiting Sebi nod are Religare Aegon, Quantum Mutual Fund, Bharti AXA, Edelweiss and Tata Asset Management.

The net asset value of these funds are expected to swell as current unfavourable market conditions will look upwards over the next three years.

As Edelweiss Asset Management Ltd Director Rujan Panjwani says, “We are bullish on MF schemes (including ELSS) and are awaiting Sebi approval."

Panjwani further points out that equity and income-related schemes will do well in future.

While earlier this month, market regulator Sebi had made it mandatory for all close-ended fund schemes to have their NAV calculated by fund houses on daily basis and all except ELSS be listed with the regulator.

This has also added to the advantage of these popular schemes.

In the current market downturn, all equity schemes including ELSS plans have suffered. However, for the investors seeking long-term growth, they still remain a good option.

They hold a good chance to deliver in the long-term also on account of their being an all-equity long-term investment instrument.

Some of the ELSS that have done well in the past include IDFC Tax Advantage-D, Baroda Pioneer ELSS 96, ING Tax Savings-G and Tauras Tax Shield-G, among others.

Close-ended funds account for 26% of the Rs4 lakh crore total asset under management of the industry. Close-ended equity schemes have around 19, 000 crore (including ELSS) assets under management and income funds (primarily debt) around Rs84, 801 crore.