ELSS mobilisation doubles in Dec as fiscal draws to close

Mumbai Jan 21 | Updated: Jan 22 2007, 06:11am hrs
Equity-linked savings schemes (ELSS) floated by various mutual funds (MFs) seem to be on a song.

A total of Rs 399 crore was garnered through ELSS schemes in December 2006, nearly double that of Rs 173 crore in November 2006, the Association of Mutual Funds in India (Amfi) data shows.

Market experts feel that mobilisation through ELSSs may gather momentum as the financial year comes close to an end in March 2007.

Naval Bir Kumar, MD, Standard Chartered Asset Management Company (AMC), said, Investors can save tax by investing in ELSS schemes of MFs. And as the time comes nearer to give proof of investments investors flock towards ELSS schemes as such schemes enforces certain amount of discipline for tax savings. ELSS schemes is expected to pick up more pace by mid -February as they give better tax planning opportunity.

He further said that it has been established that stock market can provide better returns over a longer period of time. Since the investments in ELSS are locked in for a period of three years, they have potential to provide above average returns as the fund managers can take long term view on any stocks.

Investors can save tax by investing in ELSS schemes of mutual funds up to a maximum of Rs. 2,000 by investing up to Rs 10,000 at 20% within the limit of Rs 60,000 as per the prevailing tax laws.

Though the returns from these schemes are not fixed, but the returns, which these funds can generate, are huge enough to compensate for the uncertainty.

According to data available on Amfi website, during the month of December the MF industry witnessed an erosion of Rs 25,907 crore in schemes investing in the money market and other liquid schemes. Even income based funds saw an erosion in its AUM of Rs 1,416 crore. Fund managers feel that this kind of trend is setting in as investors are pulling out money to invest in ELSS and other tax savings instruments.