Few takers for ELSS of mutual funds

Unit Trust of India is expected to close its ELSS, Master Equity Plan (MEP ’98) with a collection of Rs 25-30 crore. This marks a drastic drop from its previous year’s collection of Rs 73 crore. In 1995, MEP had garnered over Rs 1420 crore while collections nosedived in the ensuing year to Rs 196 crore.

“The response this year has not ben very good due to the prevailing market sentiment,” said a UTI official. He, however disagreed that tax-saving options from financialinstitutions like IDBI and ICICI had an impact on collections as “instruments are different.” This is precisely the reason why investors have moved away from ELSS. An ELSS, besides being an instrument for cutting down tax outgo, is essentially a growth scheme. “The collections have gone down further this year because the market has been in doldrums for the last three-four years. However, once the market rallies for 10-12 months, it will prop up the NAVs of ELSS and investors are expected to flock to these instruments next year,” a fund analyst elaborated. “With the majority of the NAVs of ELSS languishing below par, investors find debt instruments for tax-saving a safer option because the principal amount is secured,” added a Mumbai-based fund manager.

In the case of Kothari Pioneer, collection for 1997-98 is likely to be the lowest so far in the taxshield series. Kothari had mobilised close to Rs 90-crore in KP Taxshield ’95. Just three years down the line, the fund is likely to end up with onlyaround Rs 1 crore this year. This is in spite of the fact that the NAVs of taxshields launched in 1996 and 1997 are well-above par.

For Sundaram Newton, which launched its first ELSS this year, the mobilisation is also likely to remain in the range of Rs 1 crore. “Going through a rough patch, ELSS are not a priority for investors this year and they are looking towards IDBI and ICICI.come funds where the returns are impressive,” said an official at Sundaram Newton.