ELSS is an Equity oriented mutual fund scheme, which is designed as a large/ large mid cap, or mid/ small cap, or diversified stocks. The investment universe and strategy differs among the schemes. The scheme documents of Mutual Fund, mentions the nature of the respective scheme. Large/ Large mid cap are stronger companies, which can withstand slowdowns/ downturns. Mid caps could face difficulty during slowdowns and receive lower valuation, but are often found to yield better returns in a 'Bull' market, when they catch up. Diversified fund portfolio, if properly designed/ created, can yield better returns at all times, as they are size and sector agnostic, and can move swiftly between sectors and market cap to generate better return. Notwithstanding the above, the overriding emphasis is on quality of stocks, to be judged on the basis of inherent strength of the underlying companies and their resilience to withstand business cycles. It is essential that investors consider quality of stock in the portfolio and the commitment of the Fund Managers/ Fund Houses to the quality aspect, while choosing a portfolio/ scheme for investment.
By Debasish Mallick, MD & CEO, IDBI Mutual Fund
NOTE: The views expressed are those of the author.