ELSS funds: Down but not out

Tax-saving or ELSS funds invest in the top 500 Indian companies by market value, offering you 68 per cent exposure to large caps, 21 to mid-caps and the rest to small-caps. Collectively, these 500 stocks cover 92 per cent of the BSE universe. ELSS funds are among the few tax-saving options that provide equity exposure. They are your go-to for smart tax savings under the old regime and for building solid long-term wealth. Highlights & trends Performance: Most ELSS funds have outperformed the BSE 500 by at least 2 percentage points since 2023. They have outpaced large-cap funds, too, 30.8 per cent versus 28.5 per cent, thanks to their mid- and small-cap exposure. Comparison with PPF: PPF may offer guaranteed returns, but those are almost guaranteed to be lower than ELSS. For someone investing Rs 1.5 lakh yearly over 15 years, ELSS would earn over Rs 30 lakh after tax. New tax regime impacts flow: FY2023 saw inflows of Rs 7,744 crore. This financial year, it has trickled down to Rs 1,040 crore. These funds will potentially get fewer takers due to the new tax regime growing in strength. Where they are investing: Exposure to Healthcare and Autos are up, while Energy and Consumer staples take a backseat when reviewed for the period from November, 2023 to May, 2024. Finance still rules, despite recent hiccups. Movers and shakers: Anand Radhakrishnan's return as CEO of Sundaram last November made waves. Meanwhile, Zerodha's newly-launched Nifty Large and Midcap 250 Fund becomes the third passive fund in this space. Category snapshot Parameters 2024 Number of active ELSS funds 36 Assets Rs 2.22 lakh crore Asset-weighted expense 0.85% Asset-weighted category returns 19.25% Average return of top quartile funds 25.54% Average return of bottom quartile funds 13.80% Average mid & small-cap exposure 29.70% Three most popular funds Quant, SBI, Parag Parikh Three least popular funds Nippon, ABSL, Axis Note: Returns are as of June 30, 2024. Expense and portfolio-level attributes are as of May 31, 2024. Popular funds based on net flows up to June 30, 2024. Changes in recommendation Fund moved down to 'Hold': Quant ELSS Tax Saver Fund moved to 'Sell': Aditya Birla SL ELSS Tax Saver Funds at a glance Fund and Index Names Rating 5Y SIP Return (%) Risk Grade Sharpe Ratio Avg. no. of stocks Expense Ratio (%) Assets (Rs cr) S&P BSE 500 TRI - 24.83 - - - - - Axis ELSS Tax Saver 1 18.02 High 0.46 48 0.8 34,896 SBI Long Term Equity 5 32.70 Below Average 1.56 65 0.94 23,888 Mirae Asset ELSS Tax Saver 3 25.51 Average 1.05 71 0.6 22,621 Aditya Birla Sun Life ELSS Tax Saver 1 18.32 High 0.7