As the financial year comes to an end, fund houses are trying to lure more investors to buy equity-linked saving schemes (ELSS). While some are offering upfront commissions in the range of 3-5%, others are busy distributing dividends. In the last few days, fund houses like UTI MF, Reliance MF, ICICI Prudential MF and Baroda Pioneer have announced dividends in the range of 15-20%. Also, there are those who are rewarding distributors with Rs 1,000 per application to convince investors to bet their money on systematic investment plans (SIPs), and this has been happening since late last year.
?Like in previous years, this year also we are pushing ELSS with marginally higher commissions. As fund inflow into ELSS means stable money for three years, the effort is worth it,? said Milind Barve, managind director at HDFC AMC.
Barve believes collections should pick up by March-end.
Marketing head of a fund house said, ?With the markets somewhat volatile, investors aren?t parking too much money in regular equity schemes, so ELSS has been hogging the limelight since the product offers a tax break.?
Incidentally, the tax break on ELSS will no longer be available once the Direct Tax Code becomes effective, probably from April 2012.
Nonetheless, given their strong track record – as a category, ELSS outperformed large- and mid-cap category schemes – fund houses should be able to garner subscriptions. Over the past one year, ELSS, as a category, has yielded an average return of over 10% while large- and mid-cap schemes have returned 9.2% and mid- and small-cap funds have given investors a return of 6.5%.
For instance, Fidelity Tax Advantage and HDFC Tax Saver schemes have given a return of 19.21% and 16.58%, respectively, over the past year. Some large- and mid-cap schemes like HDFC Top 200 and JPMorgan India Equity have returned 16.96% and 15.86%, respectively.
The aggressive marketing has seen money moving into ELSS in the last couple of months with net inflows of over Rs 350 crore. In the three months to March 2010, ELSS garnered over Rs 1,200 crore, though in the March 2009 quarter collections were a mere 400 crore.
Surajit Misra, national head of MFs at Bajaj Capital, said this time around a trend is emerging whereby many investors are putting money in lump sum rather than investing through SIPs.
SIPs sold by distributors are fetching upfront commissions of 3-5%,while trail commissions remain at anywhere between 0.25% and 0.75%. In the last two months alone, there have been net inflows of over Rs 350 crore into ELSS, which otherwise had been facing heavy redemption pressure.