Lack of clarity on tax implications under the impending new rules and poor returns kept retail investors away from tax-saver mutual fund schemes last fiscal, when inflows plunged 58%.
Net inflows into equity-linked saving schemes, which provide tax benefits to investors, dropped to 606 crore last fiscal from 1,437 crore a year earlier. At the peak of the bull market in 2007, these funds raised assets worth 5,499 crore in the "tax-season months" between October 2007 and March 2008.
"Investors are shifting from lump-sum investment to the systematic investment plan. This trend has hit inflows into tax-savers in a big way," said Karan Datta, national sales head, Axis Asset Management . Another reason for the low investment flow into tax-savers, according to Mr Datta, is the inadequate support from fund distributors. "The number of IFAs (independent financial advisors) selling mutual funds has come down significantly over the past year."
According to fund industry sources, investors are also put off by the average performance of tax-savers over the past year - while the 30-share Sensex gained about 8%, ELSS, as a fund category, generated just over 6% returns.
Tax-savers, with an asset base of over 25,500 crore, form 4% of the overall fund industry asset base of 5.92 lakh crore.
"Traditional investment products like PPF, national savings certificates, traditional insurance schemes and retail bond issuances were the major recipients of retail money this fiscal year," said K Venkitesh, national head - distribution, Geojit BNP Paribas Financial Services . " ELSS did not evince much interest as investors are unclear about the fate of tax-saving products under the direct tax code."
As per the direct tax code, investors will not be able to get tax benefits if they invest in ELSS or ULIPs. The DTC shall be effective from April 1, 2012.
Tax-saver bond issuances by IDFC, IFCI, L&T and PFC also ate into the ELSS pie. Retail tax saving bonds, with coupon rates ranging between 9% and 9.5%, have raised over 5,000 crore from retail investors over the past six months, wealth managers said.
Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/inflows-into-elss-funds-down-by-almost-60/articleshow/7976978.cms
Net inflows into equity-linked saving schemes, which provide tax benefits to investors, dropped to 606 crore last fiscal from 1,437 crore a year earlier. At the peak of the bull market in 2007, these funds raised assets worth 5,499 crore in the "tax-season months" between October 2007 and March 2008.
"Investors are shifting from lump-sum investment to the systematic investment plan. This trend has hit inflows into tax-savers in a big way," said Karan Datta, national sales head, Axis Asset Management . Another reason for the low investment flow into tax-savers, according to Mr Datta, is the inadequate support from fund distributors. "The number of IFAs (independent financial advisors) selling mutual funds has come down significantly over the past year."
According to fund industry sources, investors are also put off by the average performance of tax-savers over the past year - while the 30-share Sensex gained about 8%, ELSS, as a fund category, generated just over 6% returns.
Tax-savers, with an asset base of over 25,500 crore, form 4% of the overall fund industry asset base of 5.92 lakh crore.
"Traditional investment products like PPF, national savings certificates, traditional insurance schemes and retail bond issuances were the major recipients of retail money this fiscal year," said K Venkitesh, national head - distribution, Geojit BNP Paribas Financial Services . " ELSS did not evince much interest as investors are unclear about the fate of tax-saving products under the direct tax code."
As per the direct tax code, investors will not be able to get tax benefits if they invest in ELSS or ULIPs. The DTC shall be effective from April 1, 2012.
Tax-saver bond issuances by IDFC, IFCI, L&T and PFC also ate into the ELSS pie. Retail tax saving bonds, with coupon rates ranging between 9% and 9.5%, have raised over 5,000 crore from retail investors over the past six months, wealth managers said.
Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/inflows-into-elss-funds-down-by-almost-60/articleshow/7976978.cms
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