According to monthly data released by Association of Mutual Funds in India, net positive inflows into equity mutual funds declined 42% in July. 8,898.25 crore from 15,497.76 crore in June 2022. ELSS funds, the most popular investment option for tax deduction under Section 80C, fell 48 per cent in terms of positive inflows. June to. 640.06 crore in 327.85 crore in July under the equity mutual fund category. For the month of July, the Total Assets Under Management (AUM) of ELSS Funds stood at 1,47,910.92 crore, above 1,34,225.70 crore in June.
With an objective to build long-term wealth, ELSS funds are flexi cap funds that are classified as all-season equity funds. Under Section 80C, ELSS funds are the only investment category that comes with a lock-in period of 3 years for tax deduction purposes. 1.5 lakh per annum. And due to the lock-in period, there is no provision for early exit from this fund. Financial experts advise investors to hold their investments in this fund for a longer period to beat inflation while providing tax benefits and wealth growth to get returns.
Commenting on the decline in equity inflows, Nitin Rao, Head Products & Offers, Epsilon Money Mart said, “The decline in equity inflows has been due to various factors such as rising interest rates, weak rupee, geo-political tensions which were earlier in Central Europe. This year and the latest spark in the Strait of Taiwan. These factors have influenced investor sentiment towards equities. However, retail participation in the equity market remains encouraging. AMFI data shows June 2022. The total SIP account now stands at 55.5 million with a monthly inflow of INR 12,276 Cr till date. These numbers reflect the confidence of retail investors and shows that they still prioritize their savings through SIPs.”
It is one of the best equity fund categories for portfolio diversification as ELSS funds invest in companies with a wide variety of market capitalizations, including large cap, mid cap and small cap. Since ELSS Mutual Funds are comprised of underlying securities, their performance fluctuates according to the market sentiment, hence there is no guarantee of returns. What should investors do after a sharp drop in ELSS fund inflows? Nitin Rao was asked about this, and he replied, “It is always a good time to invest in the markets if it is for a longer period i.e. around 7-10 years. Historically, it is It has been proven that equities have outperformed all other asset classes over the long term. We are in the corporate earnings season with no major movements so far, the monsoon is also progressing as expected, and the festive season As well as consumption demand is expected to pick up. All these factors should help the domestic equity markets.”
He further added that “Investors should invest as per their target and time frame. If the investor is investing to claim profit u/s 80C of the Income Tax Act, he should consider investing in ELSS funds. Since these funds invest primarily in the domestic equity market, they should also benefit from market volatility in the short and long term.
Nitin Rao further added that “Equity Linked Savings Scheme is the only category of Mutual Fund that offers tax deduction under the provisions of Section 80C of the Income Tax Act. An investor is entitled to claim a total deduction of INR 150,000 in a financial year. However, the investment made in ELSS fund is locked for a period of 3 years. This means that the investor cannot redeem his/her investment from ELSS fund before 3 years from the date of investment. u/s 80C Compared to other investment options, ELSS stands out in terms of performance over a period of 3 years.
Commenting on the future performance of ELSS funds, he said, “As on 31st July 2022, the ELSS category average return has been 17.29% which is higher as compared to the equity large cap category (15.19%). Selected funds from the category have delivered 3. Has given returns of more than 20% over a period of one year. Investing in ELSS category has immensely benefited the investors as the returns generated by this category are better than any other investment option available for investment under section 80C. Going forward, these The funds are expected to perform in line with their investment objective and strategy, which aims to outperform the benchmark and create alpha for investors.”
Equity Mutual Fund category sees positive inflow of large cap funds 1,090.91 crore in July as compared to the inflow of 2,130.35 crore in June, a decline of 48 per cent. Large and mid cap funds see positive inflows 1,119.80 crore as compared to July 1,994.73 crore in June, a decline of 43 per cent. In July, the mid cap fund category had positive inflows 1,244.67 crore, below 1,851.67 crore in June and a decline of 32%. In July, the small cap fund category had positive inflows 1,779.45 crore, above 1,615.92 in June, an increase of 10%.
While the Flexi Cap Fund category registered a positive inflow of 1,381.55 crore in July which was 2,511.74 crore in June, a decline of 44%. The total assets under management (AUM) of the mutual fund industry have increased 35.64 lakh crore in June 37.74 lakh crore till July 31, 2022. SIP accounts increased to 5.61 crore in July from 5.55 crore a month ago. In July, the systematic investment plan contribution dipped slightly from the previous month’s Rs. 12,276 crore to Rs. 12,140 crores.
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