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Tax-Saving Funds Move Into Green

Investors in these funds can look to book some profits

The markets have been rising significantly over the past couple of months, more so after a strong government was ushered into office by the Indian electorate recently. While this impetus has been very productive for some, not all, short-term investors, it has also created big rewards for long-term investors as well.

In fact, the ideal way of looking at the situation goes something like this: the short-term profits should be seen as windfalls, or merely getting lucky, rather than a steady accretion of profits as a result of a well-thought out investment policy, which is the most rewarding of all.

Returns of Tax Saving Schemes: 3 - year

As far as mutual fund investors are concerned, there is some good news for them too. While one-year returns of all equity categories are still in red, three-year returns look to be reviving.

Three-year returns of tax saving funds, otherwise known as ELSS, are now in green with 18 out of 26 open-end tax-saving funds giving positive returns as of May 26, 2009. Canara Robeco Equity Tax Saver comes out as the best fund with returns of 14.2 per cent. It was followed by Taurus Tax Shield (13.26%), Sundaram BNP Paribas Taxsaver (10.84%) and Fidelity Tax Advantage (9.33%). However, while the gains are very much there, just three funds in the category managed to post a double-digit return, perhaps indicating the recovery is shallow and may not last long.

Among the best-performing funds though, as of May 26, 2009, are banking funds, which have given the highest three year return of 21.14 per cent. Diversified equity and tax-saving funds follow with 4.35 per cent and 3.01 per cent respectively. Pharma funds have returned a meagre 0.04 per cent. FMCG, technology and auto funds are still lagging with negative returns.

Also see:
Best Tax-Savings Funds: 1 year
SBI Magnum Taxgain: Dividend Decleration