Inflows into ELSS Plans surge in February

MUMBAI: Investor appetite for tax-saving equity mutual funds remained strong in February even as demand for schemes that invest in stocks waned following the market tumble. Equity Linked Savings Schemes (ELSS) of mutual funds received net inflows of Rs 888 crore in February, the highest in the current financial year. This is almost double the average monthly inflow of Rs 454 crore in calendar year 2015.

In February, the diversified equity mutual funds category saw net inflows fall to Rs 1,634 crore, the lowest in this financial year. In 2015, the average monthly flows into equity funds were over Rs 7,000 crore.In the two months ending February 29, the Nifty fell 12.25% while the Nifty Midcap 100 lost 14.64%. Wealth advisors say while the demand for ELSS was partly because of the financial year-end rush, investors are increasingly going for systematic investment plans (SIPs) in these products.

“Many investors are using the SIP route to invest in ELSS s chemes, ” s ays Aashish Somaiya, managing director, Motilal Oswal Mutual Fund. With the SIP book of equity mutual funds rising to Rs 2,500 crore, he believes 15-20% could find its way into the ELSS schemes. Some distributors said several first-time investors who stuck to public provident fund (PPF) to save taxes in the past are giving ELSS a shot.

“Many investors believe that interest rates are likely headed down. With public provident fund (PPF) rates likely to be reset every quarter, they are allocating part of the Section 80C limit to tax-saving funds as well. They believe that equities will help beat inflation in the long run and hence making a part of their allocation to ELSS,” says Gajendra Kothari, managing director, Etica Wealth Managers.