MUTUAL FUNDS 31 Dec 2016

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Equity Linked Savings Schemes (ELSS)
Schemes from ELSS Category:
Scheme Name Inception Date Corpus (Rs.in Expense NAV 6 Months 1 Year 3 Years 5 Years 10 Std.
Crs) Ratio (%) Absolute CAGR CAGR CAGR Years Deviation
CAGR
AXIS Long Term Equity Fund (G) 12/29/2009 10486.56 2.50 30.27 -3.14 -0.83 20.51 22.29 0.87
Reliance Tax Saver (ELSS) Fund - (G) 9/21/2005 5882.18 2.39 47.28 2.21 4.74 22.93 22.83 12.35 1.15
DSP BR Tax Saver Fund (G) 1/18/2007 1458.06 2.56 35.38 4.20 10.33 20.58 21.14 1.00

Franklin India Taxshield - (G) 4/10/1999 2368.53 2.42 434.17 -1.19 3.66 19.11 18.38 13.18 0.87
HDFC Long Term Advantage Fund (G) 1/2/2001 1219.14 2.55 257.45 5.31 11.76 16.34 17.68 10.86 0.93
ICICI Pru Long Term Equity Fund (G) 8/19/1999 3549.73 2.36 282.55 0.03 3.88 17.48 19.70 11.79 0.85
Birla Sun Life Tax Relief '96 (G) 3/10/2008 2357.70 2.25 22.30 -0.09 3.09 20.02 20.66 0.89

Benchmark:
S&P BSE Sensex 26366.15 -1.40 1.10 7.53 11.13 6.69
Nifty 50 8103.50 -1.22 2.20 8.65 11.75 7.40
TRI Sensex 37105.34 -0.89 2.60 9.11 12.87
TRI Nifty 10929.53 -0.72 3.56 9.94 13.13 8.66
Nifty 500 6915.45 0.12 3.13 12.02 13.88 7.69
NAV date December 29, 2016, Annualized Standard Deviation is calculated from last 1 year data with daily periodicity. Source:NAVIndia

Key Features and Benefits:

Equity Linked Saving Schemes (ELSS) are mutual fund schemes which offer tax benefit to investors up to a limit of Rs 1,50,000 in a single financial year (i.e:
from 01 April 2016 to 31 March 2017) under Section 80 C of the Income tax Act. Investors save tax (as per their income tax slab) on the amount invested.
Each investment has a lock-in of 3 years from the investment date. No withdrawals are allowed before this lock-in period is over. Investment can be either in
Lump sum mode or through regular SIP.
The fund manager of the scheme may invest in equity stocks as per their own strategy and internal processes from time to time. They can invest in large, mid
and/or small cap stocks.
Growth, dividend, and dividend re-investment options are available. Growth option allows money to compound and grow and dividend option allows investors
to expect dividends from time to time. Sub-options of receiving dividend monthly, quarterly, semi-annually are available from scheme to scheme. Based on
their own need for regular cash flows investors can chose from these options.
Dividends are tax-free but are not guaranteed as investment is in equities and will depend on market conditions and fund manager performance.
The entire amount received at the end of the 3 year lock-in period is tax-free for investors.

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As the inflows in these schemes are stable and there are no outflows, the fund manager is able to take a genuine long-term view and invest as per their
strategy and process. This normally leads to outperformance over the benchmark indices (e.g: BSE Sensex, NSE Nifty, BSE 500, NSE 500)
These schemes offer Real returns to investors. Real return is the returns to investors post tax and post inflation. Historical data shows that these schemes
have generated superior Real returns for investors.
These schemes offer multiple advantages of providing equity linked returns along with tax benefit on investment in a short lock in period of 3 years. The lock-in
period applicable to ELSS is 3 years, while it is 6 years in the case of National Savings Certificates and 15 years in the case of PPF. Opting for the dividend option
in the ELSS allows investors to realize some gains even during the lock-in period.
Currently, there are 43 open ended ELSS schemes offered by the domestic MFs.
How are ELSS better than other tax saving options?

Among the many tax saving options, investment in ELSS is considered to be superior as they provide better Real returns with a short lock in period of 3 years.
The top performing ELSS schemes have delivered superior returns over the long term compared to other tax saving options available for investments.

Other options available to investors to avail section 80C benefits (within the overall limit of Rs. 1,50,000 per financial year) are Employees Provident Fund
(EPF), Public Provident Fund (PPF), Five-year fixed deposits with Banks, National Savings Certificate (NSC), Life insurance premiums, Pension policy premium,
Senior Citizens Savings Scheme etc.

Please note that, recently, the finance ministry has decided to reset the rates of the centrally sponsored savings schemes such as PPF, NSE, SCSS, Bank
deposits, etc on periodical basis to align with the interest rates in the domestic economy. This will further reduce the yields that are generated from these
saving schemes. Hence, ELSS is superior over these saving schemes on generating higher returns.

Comparison of some of investment products qualifying under Section 80C:

Particulars ELSS PPF NSC 5 Yr FD

Return Market linked return ( 10% - 15% p.a)*** 8.0% p.a^ 8.0% p.a.^ Ranging 6.9% to 7.6%^

Lock in 3 Yrs 15 Yrs 5 Yrs 5 Yrs

Risk Market linked. Returns are not guaranteed. Guaranteed Return Guaranteed Return Guaranteed Return

Maximum Investment Rs. 1,50,000 Rs. 1,50,000 Rs. 1,50,000 Rs. 1,50,000

Dividends are tax free. Only STT chargeable Interest earned is tax free. No tax Interest earned is taxable. No tax Interest earned is taxable. No tax
Tax on Interest / Exit
on exit. No Capital Gain Tax. on Capital withdrawal. on Capital withdrawal. on Capital withdrawal.
*** - approx. ^- will be reset periodically.

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Investing through SIP in ELSS:

Systematic investment plan (SIP) is the ideal method to invest in a disciplined manner without trying to time the market.

It enables investors to make regular and equal payments at regular intervals for periods to accumulate wealth over long run. An SIP is a planned approach
towards investments and helps you inculcate the habit of saving and building wealth for the future.

Investing through SIP route in ELSS is an optimal way to accumulate corpus and can be better option for all tax paying investors who have scope to invest u/s
80C of the Income tax Act. SIP option helps start tax planning from the beginning of the financial year. Investments through SIP mode have grown firmly and
given significantly higher returns over the longer term. Investors can prefer monthly or quarterly frequency to invest in ELSS schemes. SIP works well across
market cycles and helps to average out the cost of investment that are done in different periods.

Features and Benefits of SIP:

Disciplined and ideal approach towards investment.

Eliminates the need to Time the market and Emotions-based investing.

Reduces Risk because of Rupee Cost Averaging. Works well across market cycles and helps to average out the cost of investment that are done in different
periods.

Can be started with very small amount of money. (Minimum Rs 500 per month)

One-time paperwork to register for SIP.

Helps start tax planning from the beginning of the financial year.

Flexibility in terms of amount or quantity based SIP.

Flexible intervals like Daily/ Weekly/ Fortnightly/ Monthly/ Yearly basis

Long term financial goals can be aligned with SIP.

Investments through SIP mode have grown firmly and given significantly higher returns over the longer term.

Every SIP installment will have a lock-in of 3 years.

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Senior Analyst: Prashant Mehta (prashant.mehta@hdfcsec.com) Source: NAVIndia.com &ACEMF

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HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Website: www.hdfcsec.com Email:
hdfcsecretailresearch@hdfcsec.com.

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This report has been prepared by the Retail Research team of HDFC Securities Ltd. The views, opinions, estimates, ratings, target price, entry prices and/or other parameters mentioned in this document may or may not match or may be contrary with those of the other Research teams
(Institutional, PCG) of HDFC Securities Ltd. HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475.

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