MF POINTER

For Private Circulation only

February, 2014

Issue - 98

ELSS Invest with a Long Term horizon

Ventura Research Desk:
The article for this month ELSS Invest with a Long Term Horizon highlights about an additional
way to save taxes by investing in ELSS mutual funds over and above the traditional instruments.
It focuses on how beneficial it is to invest in equities provided you have a long term investment
horizon. Turn to page 2 for details on the performance of various mutual fund categories in the
industry. Top performing equity and debt mutual fund schemes are highlighted on Page 6 & 7.
Happy Investing!!
Juzer Gabajiwala
Markets:
The Indian bourses rebounded sharply in February, with key benchmark indices the Sensex
and Nifty - soaring by 2.96% and 3.08%, respectively. Indian equity markets made a slow
start but, later bounced back and closed the month with good gains. Initially, markets
remained subdued after the Government revised the GDP growth rate downwards from 5%
to 4.5%. Weak global cues also drove markets down. However, markets gained as investors
cheered the interim budget announcements made by the Finance Minister P Chidambaram.
Traders also welcomed the Government's resolve to contain the fiscal deficit at a target of
4.6% of GDP in 2013-14 and 4.1% of GDP in 2014-15. Markets rose further after the data
showed that Foreign Institutional Investors (FIIs) remained net buyers of Indian equities.
On the macro economic front, India's industrial output dropped by 0.6% in December,
registering a contraction for the third consecutive month, due to a decline in manufacturing
production. However, on a brighter note, consumer inflation for January eased to its lowest
level in two years, from 9.87% in December to 8.79% in January; the moderation came
mainly on the back of a fall in food prices.
In the case of bond markets, the benchmark 10-year bond yield closed at 8.86% for the
month of February 2014 as liquidity concerns ahead of the financial year end dampened
investor sentiments. Weakness in the rupee also pushed bond prices higher. However, yields
found some support after the Government announced slightly lower borrowing numbers and
a better-than-expected fiscal deficit target in the Interim Budget report.
According to data released by the Securities
and Exchange Board of India (SEBI), FIIs
continued to remain net buyers in the
equity segment during the month. They
bought equities to the tune of Rs. 1,404.30
crore against Rs. 714.30 crore recorded in
the previous month, while domestic
mutual funds remained net sellers in the
Indian equity markets, to the tune of Rs.
1,207.50 crore (upto 24th Feb, 2014).

February, 2014

Smart investing starts here

MF POINTER

*Returns as on 28-Feb-2014

Category returns: For the month of February 2014, all of the categories posted positive
returns. Meanwhile, the top five category gainers were Equity - Pharma, ELSS, Contra,
Infrastructure and Diversified. These categories generated absolute returns in the range of
3.57-7.62%. However, the bottom categories were Gilt, Income and Floating rate funds. These
three categories merely rose by 0.01%, 0.28% and 0.64%, respectively, during the month.
Top 5/Bottom 5
Equity Schemes
Top Performers

Under Performers
Absolute
Ret. % (1M) Scheme Name

Scheme Name
PineBridge World Gold Fund

11.97

DSPBR World Gold Fund

9.60

Absolute
Ret. % (1M)

Baroda Pioneer PSU Equity Fund

(1.92)

SBI PSU Fund

(1.60)

PineBridge Infra & Eco Reform

7.32

DSPBR Natural Res & New Energy

(0.55)

Mirae Asset Emerging BlueChip

6.91

GS PSU Bank BeES

(0.50)

ICICI Pru Midcap Fund

6.54

Kotak PSU Bank ETF

(0.50)

Debt Schemes
Top Performers

Under Performers
Annualised
Ret. % (1M) Scheme Name

Scheme Name

Annualised
Ret. % (1M)

ICICI Pru Moderate

33.95

ICICI Pru Gilt-Treasury-PF

(19.57)

ICICI Pru Cautious

17.10

DWS Inflation Indexed Bond

(15.41)
(12.96)

IDFC Asset Alloc-Mod

15.89

DWS Gilt Fund

FT India Life Stage FOFs-40

15.34

Baroda Pioneer Income Fund

(8.07)

Religare Invesco Gilt-Long Duration

14.34

Baroda Pioneer Dynamic Bond

(7.94)

*Returns as on 28-Feb-2014

Smart investing starts here

February, 2014

MF POINTER
ELSS Invest with a Long Term horizon
With the financial year coming to an end, most of us are in the process of finalizing avenues to
invest, which will give us a tax deduction of up to Rs 1 lakh under Section 80C.
Over the years, many individuals have started investing in equity linked savings scheme (ELSS)
under Section 80C. This is because along with the tax deduction, the investor also enjoys the
potential upside of investing in the equity markets. But wherever there is a potential for an
upside, there is also the possibility of a downside.
However, quite often ELSS is not looked at as an investment product that should be held for the
long run, beyond the 3 years lock-in period which enables a tax break. Investors tend to
withdraw their funds after getting the tax break. Although, ELSS is a great way to save taxes,
staying invested in equity for just 3 years does not usually deliver the best possible returns.
Time and again, studies have shown that to get the best benefits from equity, the longer the
investment term, the better the returns and the lower is the possibility of negative returns.
Hence it is ideal to look at this product for at least 10-15 years.
To draw an analogy (please note it is not a comparison): We are comfortable putting money in
PPF for a fixed return (which has a 7 year lock-in and tenure of 15 years). We also purchase
insurance policies, wherein we pay yearly premium and our money is locked-in for the term of
the policy. Though we may consider these as safer bets, as they are not affected by volatility, the
biggest risk is that they are unable to generate inflation-adjusted real returns over the long run.
So then why not look at equity as a part of your long term corpus? This asset class has proven to
be the best performer over the long term. The icing on the cake is that no tax is levied on the
long term capital gains from equity funds and dividends are tax free too.

ELSS Category

1 Yr

3 Yrs

7 Yrs

15 Yrs

Weighted Average Returns

11.62

8.26

5.83

3.47

Best ELSS Fund

20.96

15.56

11.89

20.15

Worst ELSS Fund

(1.23)

(6.02)

(5.25)

3.23

3.49

6.01

6.21

12.68

CNX Nifty

%CAGR Returns as on 17-Feb-2014. SIP of Rs. 10,000 per month.

We believe that instead of making a lump sum investment just for the sake of tax saving,
investors should stagger their investments from the start of the financial year. Ideally, you
should choose a fund for investment purposes based on different investment time frames and
fund corpuses.
In many cases investors tend to exit an ELSS investment once the lock in period is complete
because they suffer notional losses due to market fluctuation or due to poor selection of funds.
While the three year milestone can be used to review the performance of an ELSS investment, it
should not be used as an automatic exit point.
Holding ELSS for a period of 7 years, as the data clearly shows, is better than stepping out at the
end of 3 years. But look at the benefits of staying invested for 15 years. It is not only more
fruitful for investors in terms of returns but it reduces the probability of facing negative returns
as well. A minimum of 10-15 years is an ideal horizon for any ELSS investments, mainly because
it gives the fund manager the room to take a long term view on the market and invest
accordingly, as is clearly reflected from the long term returns.

Smart investing starts here

February, 2014

MF POINTER
Scheme Name

AUM
(Rs.Cr.)

1 Yr

3 Yrs

7 Yrs

15 Yrs

Axis LT Equity Fund

854.05

20.96

15.56

Birla SL Tax Plan

115.89

12.01

9.35

7.42

1382.70

12.63

9.29

155.71

8.99

10.23

8.21

Birla SL Tax Relief '96

BNP Paribas Tax Adv Fund

30.64

14.40

9.29

Canara Rob Equity Tax Saver Fund

BOI AXA Tax Adv Fund

599.82

4.47

6.64

DSPBR Tax Saver Fund

718.18

10.52

9.81

9.44

DWS Tax Saving Fund

40.94

5.29

6.81

4.44

Edelweiss ELSS Fund

25.17

11.53

10.23

2.50

3.33

(6.02)

(5.25)

949.88

10.08

8.66

10.58

846.23

16.00

10.38

10.44

3,423.37

12.66

6.13

8.88

20.15

Escorts Tax
Franklin India Taxshield
HDFC Long Term Adv Fund
HDFC TaxSaver
HSBC Tax Saver Equity Fund
ICICI Pru Tax Plan
IDFC Tax Advt(ELSS) Fund

161.58

9.96

9.32

8.81

1,541.09

17.37

10.99

11.89

165.59

15.73

12.38

ING Tax Savings Fund

21.18

4.03

3.43

5.27

JM Tax Gain Fund

27.12

4.04

4.46

5.08

6.14

5.16

JPMorgan India Tax Advantage Fund

Kotak Tax Saver Scheme
L&T Tax Advt Fund

327.19

(1.23)

0.88

3.43

1,083.41

4.28

5.38

8.95

L&T Tax Saver Fund

26.24

13.19

6.29

5.13

LIC Nomura MF Tax Plan

27.73

9.34

6.75

4.71

8.75

Quantum Tax Saving Fund

15.57

9.85

9.32

Reliance Tax Saver (ELSS) Fund

Religare Invesco Tax Plan
Sahara Tax Gain Fund

1,881.90

14.11

7.40

9.27

138.10

13.10

9.68

11.22

10.64

19.03

8.22

9.94

3.23

SBI Magnum TaxGain'93

4,021.74

12.39

9.47

Sundaram Tax Saver

1,090.90

1.70

4.55

6.06

84.62

3.91

3.89

7.50

11.05

Taurus Tax Shield Fund

Union KBC Tax Saver Fund
UTI ETSP Fund

55.27

5.67

399.61

5.34

5.95

5.90

Hence, equity can be a risky investment if you're investing for a short period of time, but with time on your
side, equity is extremely rewarding.

February, 2014

Smart investing starts here

MF POINTER
Performing Mutual Fund Plans
Debt and Hybrid Funds

Corpus
(` Crs)#

NAV (`)

Annualised(%)

Gr

Div

3 mths 6 mths

1 yr

15.05

11.15

9.43

13.86

10.40

172.38 2,215.94 1,528.49

9.31

10.20

10.08

Income Funds
Birla SL Medium Term Fund

2,209.74

Taurus ST Income

2,530.81

20.29

12.98

8.45

12.53

10.00

Templeton India Ultra Short Bond Fund

3,537.05

16.70

10.09

9.61

10.85

10.17

DWS Ultra Short Term Fund

2,307.70

15.17

11.32

8.75

11.03

9.99

117.50 1,520.90 1,002.40

8.87

10.82

9.98

Birla SL ST Opportunities Fund

Ultra Short Term Plan

Taurus Ultra ST Bond Fund

Gilt Funds

31.23

20.89

11.96

10.85

13.02

18.21

474.69

25.81

10.35

7.68

9.24

10.07

Principal Retail Money Mgr

18.74 1,431.86 1,059.87

9.36

10.25

9.82

Religare Invesco Overnight Fund

10.38 1,493.79 1,001.36

8.18

8.80

9.75

Sundaram Gilt Fund

DSPBR Treasury Bill Fund
Liquid Funds

195.33

19.70

15.04

9.57

10.16

9.65

185.54

22.30

11.56

8.86

20.95

8.97

79.86

38.65

10.41

7.71

12.07

8.93

Crisil Liquid Fund Index

8.69

10.31

9.15

Crisil Composite Bond Fund Index

5.53

11.06

3.17

Escorts Liquid Plan

Hybrid - Monthly Income Plans(MIPs)
Birla SL MIP II-Wealth 25
LIC Nomura MF MIP

*Returns are annualized as on 28th February 2014

# Monthly Corpus as on January 2014.

Smart investing starts here

February, 2014

MF POINTER
Performing Mutual Fund Plans
Equity and Hybrid Funds

Corpus
(` Crs)#

NAV (`)
Gr

Div

CAGR (%)
1 yr

3 yrs

5 yrs

Equity - Large Cap

Religare Invesco AGILE Fund

35.61

8.48

8.50

20.80

9.83

15.18

LIC Nomura MF Growth Fund

65.68

14.64

12.98

15.82

6.09

19.20

317.85

28.28

13.31

15.46

9.94

20.80

45.41

69.09

19.26

36.43

10.55

26.66

125.56

87.49

52.51

21.72

13.31

27.23

Birla SL Top 100 Fund

Equity - Multi cap
Birla SL India Opportunities Fund
Tata Ethical Fund
Equity - Mid & Small cap
SBI Magnum MidCap Fund

215.93

32.77

18.15

29.50

17.01

29.63

Reliance Small Cap Fund

345.79

12.13

11.09

25.80

10.15

UTI Mid Cap Fund

255.25

40.46

27.59

25.35

12.43

27.74

ICICI Pru Technology Fund

210.63

38.87

28.68

58.42

23.18

42.86

ICICI Pru Exports & Other Services Fund

262.44

29.63

20.03

54.56

22.37

30.83

854.05

17.79

14.18

26.37

15.65

56.01

18.05

16.27

20.57

16.61

6.44

9.24

9.24

19.07

8.41

13.01

440.97

58.85

58.85

21.17

14.46

26.56

1,197.12

27.14

19.54

Equity - Sectoral

Tax Saving Scheme(ELSS)

Axis LT Equity Fund
ICICI Pru R.I.G.H.T Fund
Religare Invesco AGILE Tax Fund
Balanced Fund
HDFC Children's Gift Fund-Invest
HDFC Balanced Fund
Sensex

18.00

8.41

16.27

21,120.12

11.97

5.81

18.87

6,276.95

10.26

5.58

17.81

Nifty
*Returns are compounded annualized as on 28th February 2014
# Monthly Corpus as on January 2014.

February, 2014

Smart investing starts here

MF POINTER
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February, 2014