IDBI Tax Saving Fund – ELSS u/s 80C

by Shiv Kukreja on August 27, 2013

in Uncategorized

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

IDBI Mutual Fund has come up with a new fund offer (NFO) of its open-ended equity-linked savings scheme (ELSS), IDBI Tax Saving Fund, from August 20th. The scheme seeks to invest predominantly in a diversified portfolio of equity and equity related instruments with the objective to generate capital appreciation and income along with the benefit of income tax deduction u/s 80C of the I-T Act, 1961.

The fund plans to invest at least 80 per cent of its corpus in equity and equity-related instruments and a maximum of 20 per cent in debt and money market instruments. The scheme closes on September 3rd and will reopen for continuous sale from September 17th.

Lock-in period: As with all other tax saving mutual fund schemes (ELSS), this fund also carries a lock-in period of 3 years, after which an investor can redeem his/her investment back to IDBI Mutual Fund whenever he/she wants.

NAV of Rs. 10 Per Unit: The units will be available at Rs. 10 face value during the NFO period and at market-linked NAV thereafter. Even after years of investor education, if somebody still feels Rs. 10 NAV is better than Rs. 100 NAV or Rs. 1000 NAV, then he/she can think of subscribing to this NFO. But, the fact would remain intact that a scheme with Rs. 10 NAV is in no way better than any other scheme with a higher NAV.

Benchmark: The performance of the scheme will be benchmarked against S&P BSE 200, which is an index of the top 200 companies listed on the Bombay Stock Exchange.

Profile of the Fund Manager: I think the fund manager is the most important factor to be considered while investing in any of the mutual fund schemes, especially an NFO. V. Balasubramanian, aged 54 years, is going to manage the corpus under this scheme. He is M.Com. and Certified Associate of the Indian Institute of Bankers (CAIIB). He has over 32 years of experience in the Finance field, with 14 years in the Mutual Fund industry and 16 years in Banking, out of which he worked for 8 years in treasury branch of Indian Bank.

He has been a fund manager with IDBI Mutual Fund since November 2011 and is already managing seven of its schemes, including IDBI Nifty Index Fund, IDBI Nifty Junior Index Fund and IDBI India Top 100 Equity Fund among others. Here is some relevant data for the schemes he is already managing:

As there are already so many tax saving schemes competing in the market with their long-term performance to be judged upon, I dont find any compelling reason for the investors to jump on to this new fund offer. Investors should check the performance of this fund before committing their hard earned money in a tough economic environment.

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