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Nilanjan Dey

`Decline in NAVs makes them attractive now'

Kolkata March 13 With the financial year coming to a close, fund houses are stepping up efforts to woo individuals with tax-saving products - equity linked savings schemes (ELSS) that allow them to save under 80C of the I-T Act. This time, distributors are referring to the marked decline in NAVs, following the recent retraction in equity prices, a development that they feel makes ELSS investments a more attractive proposition.

ELSS are currently said to be high on the market's agenda, especially so for investors who need them in the eleventh hour. As fund marketers suggest, this year has not been any different for this category of funds, with some sections taking to them in the last minute for tax-planning purposes.

The current environment, however, is different from what was seen this time last year, fund circles say. At least two tax-planners were launched in the first couple of months of 2006. The whole of last year saw about half a dozen new launches.

About 30 tax-planners are available at the moment and much of the fresh sale that is happening is on the strength of past performance, distributors say, adding that clients are being told that NAVs are now off their recent highs.

Fund sources also refer to the figures that have been notched up by these funds. The average three-year score of 33.5 per cent - considering the lock-in requirement - places them next to technology funds, the top-performing category with 43.8 per cent to their credit. These figures, compiled by Value Research, pertain to March 12.

Sources further say that the mandatory lock-in can work in favour of the tax-planners. Mr Sandip Sabharwal, CIO (Equity), JM MF, feels that these funds are not as perturbed by redemption compulsions as normal open-end equity products. Distributors, who claim they have been encouraging clients to consider ELSS, say these funds have lost ground in the last few weeks - just like other equity options. Distribution outfit SKP Securities notes that with March coming to an end, an investor is not left with too long a time for selecting an ELSS. A comparative list drawn up by it underlines some of the 3-year toppers: SBI Magnum Tax Gain (61.56 per cent, as on March 6), HDFC Tax Saver (45.29 per cent), Sundaram BNP Paribas Taxsaver (44.73 per cent) and Prudential ICICI Tax Plan (44.32 per cent).

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