Performance Analysis of Mutual Fund Equity Linked Savings Schemes

Abstract

In India tax benefit on investments are offered on a number of products like postal small savings, insurance, bank fixed deposits, pension schemes, public provident fund, health insurance, tax saving mutual fund schemes etc. Mutual fund schemes are considered as most risk among all, as returns are subject to market risks. With increasing awareness on mutual fund and reduction of returns on traditional tax savings products, now investors are turning towards mutual fund retirement schemes, unit linked insurance plans and equity linked saving schemes. The present study is to understand the mutual fund Equity Linked Savings Schemes (ELSS) market in India and performance analysis of specific ELSS schemes over last 10 years period from 2009 to 2019 as compared to diversified equity market benchmark returns. From ELSS market growth analysis, it is observed that ELSS market in India has grown @CAGR of 20% in last 19 years and from performance analysis it is observed that, as on January 21, 2019 ELSS peer group average have delivered negative returns in 1 year period. However, for 2 years, 3 years, 5 years, 10 years period the peer group average is positive and higher than the traditional fixed income tax savings products. Further, the peer group average underperformed in 1year, 2years and 3 years period but out-performed the benchmark in 5 years and 10 years performance measurement period.