The tax-saving season is here. However, taxpayers are not in hurry to invest in Equtiy Linked Saving Scheme or ELSS, say mutual fund advisors and distributors. According to these intermediaries, the last-minute rush of investors for ELSS haven’t still started in the new year yet. January to March is considered the tax saving season because many taxpayers love to finish their investments to save taxes only in the last three months of the financial year.

“The SIPs are intact, but the last minute lumpsums are not there. Thankfully investors are not redeeming their SIPs in ELSSs. However, the kind of rush we have seen in 2017 and even in 2018 December-January is not there,” says Arun Kumar, Head of Research, FundsIndia, an online investment platform.

Mutual fund distributors believe that many investors have staggered their tax-saving investments over the year. They also say that the investors who come chasing the returns in ELSS are nowhere to be seen. “We have seen so many investors coming to the ELSS folds in the last moment because they provide better returns than the other tax-saving instruments. Clearly such investors are not coming this year,” says Puneet Oberoi, Founder, Excellent Investments Advisors, a Delhi-based investment advisory firm.

Oberoi says that 2017 saw a massive inflow of lumpsum and last-moment tax-saving investments in 2017 and 2018.

Many mutual fund advisors and distributors attribute to the lukewarm response from investors to the unimpressive performance of ELSS funds in the last one and a half years. The ELSS mutual fund category offered an average return of 8.34% in one year, 0.43% in two years, and 10.89% in three years. Here’s how the toppers and the laggards of the ELSS category in the last three years performed.

Year Toppers Returns (%) Laggards Returns (%)
2017 BOI AXA Tax Advantage Fund 59.93 Quantum Tax Saving Fund 22.03
2018 Axis Long Term Equity Fund 3.71 Nippon India Tax Saver (ELSS) Fund -20.58
2019 Mirae Asset Tax Saver Fund 16.04 Quantum Tax Saving Fund -1.35

Mutual fund distributors say that many direct investors who got into ELSSs for the extra returns are vary of investing in them this year. Amfi data suggests that in November 2019, the total inflows in ELSS mutual fund category were Rs 287.67 crore, compared to Rs 835 crore inflow in November 2018.

Some mutual fund distributors are not giving up hope yet. They believe ‘we might have to wait for the January-March data to validate this further.’

Mutual fund advisors believe that the serious, long-term investors are not worried about the prospects of ELSSs. They say that it is only the ‘short-term money makers’ who are staying away from these schemes this year.

“We just did the yearly reviews for our clients and not even a single investor wants to stop SIPs in ELSSs. We saw a lot of investors coming in Jan 2017 for ELSSs and then leaving when the market started falling. There will always be such investors who want to cash in on short-term opportunities. But I believe that mutual fund investors have matured in the last few years and they take ELSSs seriously,” says Shifali Satsangee, Founder, Funds Védaa, a Mumbai-based wealth management firm.

These advisors say that even on mutual fund forums and workshops they tell investors to stick to ELSSs for a long term and not get distracted by the short-term performance.

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