Equity savings funds: Flying high

If the removal of indexation benefits from debt funds has upped anybody's game, that has to be the rather timid hybrid category - equity savings. From an asset size of Rs 16,000 crore in March this year, these funds have impressively surged, collectively reaching an AUM over Rs 24,000 crore. As highlighted in our last update, given the revised tax laws for debt funds, equity savings funds are the only ones that provide the best of both worlds - a moderate equity exposure (limited allocation of about 30-40 per cent) and tax treatment akin to that of equities. We are comforted to witness this kind of resurgence of investor interest, considering the neglect this category endured for the majority of the last five years. The investment case Equity savings funds enable an investor to get a readymade asset allocation (these funds invest about a third of your money each in equity, debt, and arbitrage opportunities). Furthermore, automated rebalancing enhances tax efficiency. The rebalancing feature was evident this year when the funds started pruning down their net equity exposures. The media