The Hindu Business Line : Equity-linked schemes to lose lustre

EQUITY linked savings schemes (ELSS) will lose their relevance in the wake of the Budget. These schemes, which provided tax rebates under Section 88 of the I-T Act, may from now on not be considered by investors in their bid to generate tax efficiency, fund circles indicate.

Mr A.P. Kurian, Chairman of AMFI, agreed the tax planners would not attract individuals in future. As on January 31, the schemes in question had about Rs 1,700 crore under their management, an overwhelming part of which was on account of close-ended options, he stated.

MFs, however, point out that the schemes are mostly small in size. Also, these have not been able to attract many investors in the past.

Mr Rajan Krishnan, head of sales at Principal MF (one of the three fund houses that run two ELSS products), maintained that individuals might not wish to commit themselves to ELSS.

Mr Dhiren Kumar, head of Value Research, felt MFs would stand to benefit from certain other aspects of the Budget, which investors thoroughly analyse in order to devise their optimum asset allocation strategy.

Mr Naresh Pachisia, MD of distribution firm SKP Securities, hoped individuals would avail of the opportunity to secure tax rebates through the existing ELSS route at least till March 31, 2005.

The lock-in period of three years can actually turn into an advantage for investors, who will not have to compulsorily redeem at the end of three years if NAVs are unfavourable at that point.

The open-ended ELSS scenario is currently quite varied, with about 20 schemes in existence.

ELSS stands out as the top-performing category - with an average 40.8 per cent returns, according to Value Research - on a three-year basis (as on February 25).

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Gold funds: A new investment avenue

Market players see no impact of STT

Fine-tuning the capital market

Taxing trades in stocks, futures and options

Traders welcome tax amendment for derivatives trading

`Positive Budget'

Equity-linked schemes to lose lustre

AMCs gearing up for gold funds

Bulls prevail

Markets give thumbs up; Sensex zooms

Moods swing for B-day brokers

`Capital gains tax benefit not extended'

FIIs can submit collateral for derivatives

Outlook may turn positive for Mastek