Page 36 - mutual-fund-insight - Mar 2021_Neat

CATEGORY WATCH

ELSS: The perfect long-term

companion

Despite outflows in recent months, the AUM of tax-saving funds has continued

to climb to cross `1 lakh crore

he category of equity-linked months. A closer look reveals that ally meant for long-term invest-
saving schemes, or tax-sav- this has resulted from slower ments. One could have earned
Ting funds, is chugging inflows at the gross level, coupled negative returns in a block of three
along. It continued to be the with accelerated outflows. years during the recent market fall
third-largest category by AUM Although it is in line with the triggered by the nationwide lock-
among equity funds as on broader trend witnessed among down. However, in that case, the
December 31, 2020, managing equity funds, a reversal is expected lowest category median on a sev-
more assets than ever. Buoyed by in this last quarter of the financial en-year basis would have been
the momentum in equity markets, year when inflows have tradition- 7.80 per cent per annum.
the AUM of this category has ally peaked.
recently crossed the mark of `1 The dwindling popularity of ELSS
lakh crore. Although the category Invest with a long-term horizon With the possibility of some tax-
touched this level one year ago as Irrespective of the noise around payers opting for the alternate tax
well, it was short-lived, owing to outflows, ELSS funds continue to regime, the popularity of ELSS
the pandemic-induced market fall. be the most preferred tax-saving funds may get dented. Introduced
The ELSS category has achieved alternative for long-term investors. in the previous year’s Budget, the
this feat despite the fact that it has The roller-coaster markets of 2020 alternate tax regime has a lower tax
been experiencing net outflows for should not deter you from invest- rate but does not allow most of the
the past four months. That’s some- ing in these funds provided that tax deductions that are otherwise
thing you don’t see often in this you have time by your side. Even available, including the `1.5 lakh
category, certainly not of the mag- though ELSS funds have a lock-in deduction under Section 80C.
nitude being seen in recent period of three years, they are ide- Some investors ask if there’s

,3:: UL[ MSV^Z
The category has witnessed net outflows for the first time since 2014.
` 4,000 crore

3,000

2,000

1,000

0

-1,000

-2000
2014 2015 2016 2017 2018 2019 2020
Source: AMFI. Data for open-end funds.

34 Mutual Fund Insight March 2021
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