A Study on Impact of Economic Slowdown on some Tax-Saving Mutual Funds scheme in India

Abstract

In this paper, a systematic study of some Tax-Saving Mutual Funds schemes in India has been done, and the Equity Linked Savings Scheme in India has been selected for the study. The idea of Equity Linked Savings Schemes or tax-saving mutual funds is simple and straightforward. These schemes offer tax deductions to the investors which are capped at INR 150000 under section 80C of the Income Tax Act. ELSS can be the gateway of equity investing for an investor. These schemes have shorter lock-in-period (3 years), these are transparent and low-cost products and have the potential of delivering superior returns over a period.

The primary objective of the study is to examine the performance of the chosen ELSS in India from the perspective of risk-return parameters. This empirical study is based on secondary data and the period of study is Covid-19 Pandemic period i.e., from March 2020 to February 2022. Here, those schemes are selected which are in existence for more than 14 (fourteen) years and have Assets under Management (AUM) of more than INR 9000 crore as on 31^st march 2022. The AUM of Aditya Birla Sun Life Tax Relief Fund (ABSTRF) (INR 13184.97 crore), HDFC Tax Saver Fund (HTSF) (INR 9070.67 crore), ICICI Prudential Long Term Equity Tax Saving Fund (IPLTETSF) (INR 9532.86 crore), Nippon India Tax Saver Fund (NITSF) (INR 11234.96 crore) and SBI Long Term Equity Fund (SBILTEF) (INR 10619.98 crore), meet the selection criterion. It is observed that four ELSS out of selected five outperformed the benchmark in terms of CAGR and risk-adjusted return. ABSTRF was the least risky fund and NITSF remained the riskiest fund during the period of study. ABSTRF, HTSF and SBILTEF remained conservative barring IPLTETSF and NITSF. The chosen schemes were adequately diversified barring ABSTRF and NITSF. Fund managers showed superior stock-selection skill.