85% ELSS funds beat the benchmark, but here's the twist

Summary: ELSS funds look like silent overachievers. 85 per cent of them have outperformed the benchmark in the last five years. But is the story really that simple? Point-to-point numbers make them look like clear winners, yet consistency tells a more nuanced tale. Before you decide whether these tax-saving funds deserve a place in your portfolio, it’s worth asking: are ELSS funds delivering steady outperformance or providing just flattering snapshots? Let’s find out.

Equity-linked savings schemes (ELSS, and popularly known as tax-saving mutual funds) used to be a no-brainer for many Indian investors. Under Section 80C of the old tax regime, you could invest up to Rs 1.5 lakh a year, save tax and build wealth in the long run.

But with the creation of the new tax regime, where exemptions don’t matter, inflows into ELSS have slowed sharply. For many, the category has lost its biggest draw.

However, despite the step-sibling treatment from investors, ELSS funds have been quietly delivering.

Beating the benchmark 

In the last five years, the Nifty 500 delivered 19.4 per cent annual growth. Yet an overwhelming 28 of 33 ELSS funds outpaced it. That’s 85 per cent of the category beating the benchmark, as of August 21, 2025.

On the face of it, this looks like a resounding victory. If you had stayed invested in most ELSS funds, chances are you would have outperformed the market.

But investing is rarely that simple. Looking only at point-to-point returns, like saying “this fund gave 20 per cent in the last five years”, can paint an incomplete picture because the result depends a lot on when you started and when you stopped.

Think of it like checking your weight on the day after Diwali versus a month later. Both numbers are true, but neither tells you the whole story of your fitness journey.

Which is why we turn to rolling returns.

Why rolling returns tell a fairer story

Rolling returns are like tracking your score in every match, not just two games. Instead of only checking how your fund did in the last five years, from August 2020 to August 2025, you look at all possible five-year periods within those years.

For example: January 1, 2020-January 1, 2025, is one period; January 2, 2020-January 2,  2025; January 3, 2020-January 3,  2025 is another, and so on. This way, you see whether the fund delivered consistently, not just once or twice by chance.

What the numbers say

If we check how funds performed across every possible five-year period in the last five years, here’s what we find:

• Nifty 500 TRI (assuming the category benchmark): 15.8 per cent average return
• ELSS funds: They beat Nifty 500 TRI by a wafer-thin margin, delivering 16.1 per cent average rolling return.

However, only 12 of the 26 ELSS funds (direct plans with a 10-year history) managed to beat the benchmark.

• For the Nifty 500 TRI, the maximum return in this period was 29.1 per cent, while the lowest was 5.9 per cent, with a standard deviation (SD) of 4.2.
• For ELSS funds, the maximum return averaged 26.5 per cent, while the lowest averaged 5.7 per cent, with the SD being 4.9.

For those unaware, think of standard deviation (SD) as the “mood swings” of returns. Lower SD means performance is more predictable, while higher SD means more ups and downs. For instance, if one student consistently scores between 70–75 marks, their SD is low. Another student who swings between 40 and 90 has a higher SD.

By this measure, ELSS funds are a bit more volatile than Nifty 500 TRI.

The bigger picture

So, where does this leave investors?

• On a point-to-point basis, ELSS funds have looked stellar. About 85 per cent beat the Nifty 500 TRI.
• On a rolling basis, ELSS funds managed to beat Nifty TRI by 0.3 per cent, but only about 46 per cent managed to consistently beat the index.

So, want to know which ELSS funds truly stand out?

That’s exactly where Value Research Fund Advisor comes in. Our platform doesn’t just show you performance numbers; it helps you cut through the noise. With decades of research and a team of seasoned experts, we analyse every fund’s track record, consistency and suitability for your goals.

Whether you’re looking to save taxes, build long-term wealth or simply find the most reliable funds, Fund Advisor gives you clear, unbiased recommendations you can trust.

Explore Value Research Fund Advisor today

Also read: New tax regime is here. Time to stop your ELSS investments?