As investors queue up to invest for their tax savings towards the end of the financial year, a revival in the equity markets in the year 2014 has brought the equity linked savings scheme (ELSS) back at fore as a means to save for taxes.
While it had fallen out of favour among retail investors over the last few years on account of weak equity market performance, the last six months has seen a rise in inflow into ELSS of mutual funds with investors putting in over Rs 1,300 crore in them .
The inflow in ELSS this fiscal is a marked improvement over the net outflow of Rs 1,642 crore from ELSS in 2013-14 and a net outflow of Rs 1,656 crore in the financial year ended March 2013.
Over the six-month period between July and December 2014, the net inflow into mutual fund ELSS has been Rs 1,316 crore. However, the net inflow in the nine-month period of the current financial year however is only Rs 362 crore as the first three months (April to June) saw a net outflow of Rs 954 crore.
This comes in line with renewed investor interest in equity mutual funds that have seen a net inflow of over Rs 50,000 in the first nine months of this fiscal on the back of a strong equity market performance.
Industry insiders see it as a reflection of both rise in equity markets and a hike in investment limit under section 80C by the government from Rs 1 lakh to Rs 1.5 lakh.
“Equities as an asset class has seen a significant rise. Since the lock-in period is only three years investors prefer ELSS and a rise in investment limit under Section 80C by Rs 50,000 has led to higher inflow of funds into ELSS schemes,” said Praveen Bhatt, COO and CFO, Axis Mutual Fund.
Insiders feel that the numbers this year will rise significantly as the three most important months in terms of tax related investments have yet to be accounted for.
Also, the inflow over the last six month shows a gradual rise in inflows into such schemes. While the net inflow in July stood at Rs 30 crore, it has been on a rise over the subsequent months and stood at Rs 594 crore in the month of December 2014.