issue 3

“Performance Evaluation of Equity Linked Saving Schemes”.

1 Dr. Mahesh Chopde  2 Dr. Jaspal Gidwani 

1.  Assistant Professor, Department of Business Management,

Jhulelal Institute of Technology., 8208610454

2. Assistant Professor, Department of Management Studies,

Gurunanak Institute of Engineering & Technology, Nagpur., 8788547038


Mutual Fund Industry of India is being growing constantly since its commencement from 1963 with the mixing of UTI in 1961.The industry has witnessed enough growth on all parameters be it; number of fund houses, number of schemes, funds mobilised, assets under management etc. Prominent drivers of this growth is Professional Fund Management, Low Transaction cost, Portfolio & Risk diversification etc. One in every of the  important goals of the mutual fund industry is to draw in and mobilise major portion of Retail investor’s savings so as to make possible the small savers to benefit from the economic augmentation by facilitating them to park their savings into the assets which yield better returns. Therefore, the question arises, has the Indian mutual industry is on the trail of providing attractive returns to their investors?

Investors are always baffled about the risk-return characteristics of their investments. The escalation of Equity Linked Saving Schemes has been phenomenal within the recent years because of various advantages compared to the other mutual fund schemes as huge diversification especially in Blue chip companies ,Tax Benefit ,superior return prospects, enhanced risk management,  Experienced  fund manager, ease of transaction to name a few.

In this context the existing research analysed the prominent Equity Linked Saving Schemes to justify superior returns at lower risk. The research was derived from secondary data, for a period of 5 years i.e. from 2015 to 2019 .The various tools used were Annualised Return, beta, standard deviation, r-squared.

Keywords: Equity Linked Saving Schemes, Risk, Return, Investors.


Mutual funds became a widely effectual way for investors to enter in financial markets in a straightforward, low cost fashion, with muting risk features by spreading the investment across differing types of securities, also called as diversification. Mutual funds have played important role in financial market in recent decades .So, it’s relevant to swot the performance of mutual funds beside with the risk it carried.

 Mutual fund is a medium for collecting the savings from Investors, issuing units to them and investing their funds in securities in accordance with objectives as disclosed in offer document.

Heaps of Mutual Funds are available where the investors can put their money. Before investing they desire to make out which fund gives more return, which fund is performing well, which fund is more risky etc. All these can be found out using certain key Financial Ratios & statistics. With the assistance of those key ratios & statistics an investor can analyze different mutual funds and put his/her money in an exceedingly fund which suits his/ her risk perception.

Mutual fund Performance in terms of returns can be gauged using Arithmetic mean & Compounded Annual Growth Rate. Risk is analyzed by sorting out Standard deviation, Beta etc. While funds can also be compared with a benchmark, industry average, and analysis of volatility and return per unit to search out how well they’re performing with relation to the market value by computing R-squared or Correlation.

2. Equity Linked saving schemes:-

Equity Linked Saving Scheme appear within the diversified group of mutual funds.  With the target to grant the double advantage of Capital Appreciation and Tax benefit to Investors, Equity Linked Saving Scheme has been designed with their maximum exposure in equity and equity-oriented securities, a component of the amount is additionally parked in debt. Concurrently, these funds have a confine period of three years, which is that the shortest among all 80 C options. There’s no upper limit to invest in Equity Linked Saving Scheme. ELSS mutual funds have the potential to suggest much superior returns than other tax saving tool like PPF or NPS.

An Individual or HUF can invest their savings in Equity Linked Saving Scheme but at the identical time it’s fitted for those investors who have sufficient knowledge of stock market and would be ready to handle more risk .Youthful investors within the initial years of their professional career can invest in these schemes with a long-term horizon. Equity Linked Saving Scheme is best appropriate for young investors as they have time on their side to set free the power of compounding to the fullest to require pleasure of soaring returns while saving on taxes.

These funds also are managed by proficient fund managers who have the unmatchable knowledge & skill, which they work towards maximizing the return on investor’s investment. ELSS funds have also included the Growth Option, Dividend Option & Dividend Reinvestments Option. Compare the fund performance with the peer competitors to certify that the fund has been consistent over the past years. Supported these factors, an investor can invest within the recommended funds.

3. Literature Review:-

Sathya Swaroop Debasish. (2009), an endeavour had been made to assess the performance of selected schemes of mutual funds supported risk-return relationship models and measures. A totality of 23 schemes offered by six private sector mutual funds and three public sector mutual funds are studied over the time period April 1996 to March 2009 (13 years). The analysis found Franklin Templeton and UTI being the superlative performers and Birla Sun life, HDFC and LIC mutual funds showing poor below-average performance.

Anitha (2011) assessed the performance of private and public sector mutual funds for a period of two years (2005-2007). Selected funds were studied using numerical measures like Mean, Variance, Co-variance and Standard deviation. The performance of all the chosen funds has exhibited precariousness during period of study leading it to a difficult situation to assign one particular fund that would surpass the others consistently.

Mallikarjuna Rao & Ranjeetha Rani (2013) analyzed the risk adjusted performance of selected balanced mutual fund schemes in India. A total of 10 schemes offered by various mutual funds were selected and studied for risk and returns parameters. The evaluation included Sharpe ratio, Treynor’s ratio, Jenson’s Alpha and Fama’s measure. The results proved that various schemes did not outperform the market. The mutual funds were found to possess low average beta, disproportionate unsystematic risk, mismatch of the risk and return relationship.

Pala and Chandnib (2014) in their study examined the performance of the few income and debt mutual fund scheme, on the muse of their daily NAVs from the period Oct 2007 to Oct 2012 and finds that the most effective scheme were HDFC Mid Cap Opportunity, Birla Sun Life MNC Fund and Quantum Long-Term Equity.

Dr. Shriprakashsoni, Dr. Deepalibankapue, Dr.maheshbhutada, (2015) made comparative analysis of mutual fund schemes, available at Kotak mutual fund and HDFC mutual fund. The study conclude that, Kotak Mutual Fund schemes are more harsh in Large Cap equity schemes and HDFC Mutual Fund schemes are more destructive in Mid Cap equity schemes, whereas both the companies’ schemes are okay managed in debt market.

Arora (2015) studied the risk-adjusted performance of 100 mutual funds from the epoch April 1, 2000 to March 31, 2008 where the results for overall performance was mixed. Sharpe ratios of 52 mutual fund schemes were better than that their benchmark indices. Treynor ratios of 70 per cent of mutual fund schemes were higher than their respective indices. Thus, majorly, almost half of the mutual funds have performed better than their indices.

Mrs. B. Kishori (2016) analyzed the performance of open-ended, growth-oriented different mutual fund schemes. Performance has been analyzed through daily NAV of schemes. BSE-Sensex has been used for market portfolio. Results are going to be  fruitful for investors for taking better investment decisions.

4. Objectives:-

  1. To weigh up and compare the performance of Equity Linked saving schemes, on the foundation of their return and risk.
  2. To measure the return earned by Equity Linked saving schemes, and make comparison against its benchmark returns.
  3. To look at the degree of correlation that exists between Equity Linked saving schemes, and benchmark returns.

5. Significance of the Study:-

Investigating Past performance of any investment is crucial, intrinsically it’s applicable to Mutual funds also, evaluating past performance of mutual funds is vital both for investors still as for fund managers. It allow an investor to calculate on what proportion return has been generated by the fund manager and what risk level has been taken in generating such returns. Further, an investor can also weigh up the comparative performance of diverse Schemes. Similarly fund managers would even be able to conversant in their performance over time and also vis-a-vis that of other competitors within the industry. The evaluation also provides a modus operandi for identifying strengths and weaknesses of fund managers within the investment process, which helps them to acquire corrective actions.

6. Research Methodology:-

Data: – This study examines 34 Equity Linked Saving schemes being launched by selected mutual funds namely LIC, HDFC, ICICI, Reliance and Birla Sun Life. These schemes are selected on the base of standard data availability during the phase of January 2015 to December 2019. Net Asset Value (NAV) data has been used and also the period of the statistics considered is from the date 1st January 2015 of the scheme till December 31st, 2019.

Period of Study: – Growth oriented Equity Linked Saving schemes, which are floated by the chosen funds during the stage January 2015 to December 2019, are considered for the intention of the study. Net Asset Value (NAV) as declared by the relevant mutual funds from the January 1st 2015 of a meticulous scheme to 31st December 2019 has been used for the purpose.

 Risk Free Rate: – Risk free rate of return refers to that minimum return on investment that has no risk of losing the investment over which it is earned. For the present study, it has been marked as 7% (0.07) per annum.

Tools and techniques For the function of Return and Risk analysis, appropriate statistical and financial tools, i.e., Average Annualised Return, Standard deviation, correlation, Beta, are applied.

7. Data Analysis & Interpretation:-

7.1 Return Measures

Investors need to consider the return part before investing within the Mutual funds. Returns are the key indicators of their investment performance and are calculated from the historical NAV’s.

In Mutual funds, NAV is that the basic element employed in calculating the returns because it keeps varying from one point of your time to other. Thus, the acquisition and sale value of investment comes by multiplying the units purchased with NAV for respective period i.e. procure date and sale date. In simple words, Net Asset Value is that the market value of the securities held by the scheme. Since market value of securities changes each day, NAV of a scheme also varies on day-to-day basis.

A) Annualized Return

Return is that the gain or loss within the value of an asset in a very particular period. It’s usually quoted as a percentage. The universal rule is that the more risk you are taking, the greater the potential for higher return.

Absolute return or Point to Point Returns: Absolute return is that the increase or decrease that an investment achieves over a given period of your time expressed in percentage terms. It’s calculated as follows:

Absolute returns = 100* (Selling Price – Cost Price)/ (Cost Price)

This measurement of return is that the simplest and it doesn’t consider time period. Most times it produces a hefty number so people are impressed!

Simple Annualized Return: The augment in value of an investment, expressed as a percentage annually.

Simple Annualized Return = Absolute Returns/Time period. 

Average Annual Return (AAR)

Average annual return (AAR) is the arithmetic mean of a series of rates of return. 

B) Benchmark:-

Mutual fund schemes invest within the market for the advantage of unit holders. How well did a scheme perform this job? An approach to assess the performance is to pre-define a comparable – Benchmark against which the scheme will be compared.

To put it very simply, a benchmark gives a layman a chance to match the performance of his/her investments there upon of the broader market. At the identical time, a fund house also can  set target returns and strive to perform better than the benchmark index.

For this study, broad-100 shared base S&P BSE 500 Index has been used as a proxy for market index this is because S&P 500 Index is fairly appropriate than BSE Sensex and NSE Nifty. Hence, it might cover the majority percentage of stocks of diversified companies and thus is predicted to supply better performance benchmark.

Table 1 Shows Average Annualised Return and its Comparison with Benchmark Index of Selected Equity Linked saving schemes:-

Source: – Own Calculation

  Interpretation: – Table 1 depicts Performance in terms of Average Annualized returns of last 5 years i.e. from 2015 to 2019 of 34 Equity Linked saving schemes & its comparison with Benchmark Index  together with their ranking.

On analyzing schemes, it’s been found  that all the schemes generate  positive average returns, none of them show negative return which may be a good sign for the Industry because it increases investors confidence in Mutual fund investment especially it boost the investment in Equity Linked saving schemes. Schemes that occupy top positions are SBI Tax Advantage Fund-Series -III-Regular, SBI Tax Advantage Fund-Series -II-Regular, Tata India Tax Savings Fund-Regular,Axis Long Term Equity Fund-Regular, DSP Tax Saver Fund-Regular and Quant Tax Plan etc.

It has been also observed that the majority of schemes generate higher returns than the benchmark returns. Out of these, some schemes have enhanced values for instance SBI Tax Advantage Fund-Series -III-Regular, SBI Tax Advantage Fund-Series -II-Regular,  Tata India Tax Savings Fund-Regular  occupies top three positions respectively on comparison with S&P BSE Top 500 Index.

These schemes were those which had out-performed the benchmark index. Thus, the investors of those schemes are rewarded well on their invested money.

7.2. Risk Measures

Return alone shouldn’t be considered because the basis of measurement of the performance of a Mutual fund scheme, it should also include the risk taken by the Fund Manager because different funds will have different levels of risk attached to them.

Risk then, refers to the volatility – the up and down activity within the markets that occur constantly over a period of your time. This volatility will be caused by numeral factors – interest rate changes, inflation or general economic conditions.

Measure of Risk Analysis:-

The risk is calculated on the foundation of NAV. The subsequent measures of risks associated with mutual funds are for the study:

A) Beta (β): i.e., fund’s volatility as regard market index measuring the extent of co-movement of fund thereupon of the benchmark index. Beta in mutual funds indicates the volatility with a right way regard to the volatility of the market. A Beta of value greater than 1 shows high volatility. To simplify, a fund with Beta of 1.2 can have a profit of 20% over the increase in Sensex, while falling or downward trend of Sensex will incur 20% more loss than the particular fall in stock prices.

B) Standard Deviation (Ϭ) i.e., Standard deviation (SD) measures the volatility the fund’s returns in regard to its average. It tells what proportion the fund’s return can deviate from the historical mean return of the scheme. If a fund has an 11% average rate of return and a standard deviation of 4%, its return will range from 7-15%.More the deviation, the more volatile is that the fund’s returns. Investors prefer funds with lower volatility.

C) Co-efficient of Determination or R-squared (R2): R-squared may be a statistical measure that represents the proportion of a fund portfolio or a security’s movements which will be explained by movements in a very benchmark index. R-squared values range from 0 to 100. According to Morningstar, a mutual fund with an R-squared value between 85 and 100 has a performance record that is closely correlated to the index. A fund rated 70 or less typically doesn’t perform just like the index.

Table 2 bestow Standard Deviation, Beta & R-Squared values of Selected Equity Linked saving schemes:-

Source: – Own Calculation

Interpretation: – Table 2 shows the Standard Deviation & Systematic Risk (Beta) of selected 34 Equity Linked Saving Schemes. Greater the number of standard deviation of the scheme more are going to be risk carried by the fund.

Analysis of table 2 clearly reveals that BOI AXA Tax Advantage Fund  has clearly outperformed all the schemes with 25.36 standard deviation followed by IDFC Tax Advantage Fund  with 22.09 standard deviation and Nippon India Tax Saver fund  with 22.04 standard deviation .These all schemes indicate relatively high volatility  .

Whereas, Franklin India Tax Shield has clearly under performed with 10.94 of Standard deviation. It indicates the fairly low volatility of the scheme .

Beta value of upper than unity implies higher portfolio risk than the market portfolio and also the other way around. Schemes namely  BOI AXA Tax Advantage Fund  followed by IDFC Tax Advantage Fund  were found to be risky as they have a beta more than 1.0 that suggests that these funds have variations more than market. The scheme with lowest beta is ICICI Prudential Long Term Fund having beta of 0.63 which means it’s less variation as compared to market fluctuations.

8. Limitations of the Study:-

For the aim of performance evaluation, those schemes are selected which are operational since last 5 years. Only growth oriented Equity Linked saving schemes have been considered for this purpose. The study has been conducted and analysed based on set of available information, which is governed by time factor.

9. Conclusion:-

Equity Linked saving schemes provide a superior investment option for the investors who want to invest in equity market for earning higher profit, at the equal time these funds invest in diversified companies with an objective to provide privileged return to the investors, Tax benefits together with spreading the risk of investors.

After analyzing the information and evaluating the performance and risk of the chosen Equity Linked saving schemes, following conclusions will be drawn:

    Schemes that generate comparatively higher returns are SBI Tax Advantage Fund-Series -III-Regular, SBI Tax Advantage Fund-Series -II-Regular, Tata India Tax Savings Fund-Regular with an average annualised return of quite 12%  whereas Scheme that’s on lower ladder  are Union Long Term Equity Fund, Nippon India Tax Saver fund, Sahara Tax Gain etc. 

At the same point of your time, it’s been found that the Average returns of most of schemes are higher when compared to its Benchmark i.e. S&P BSE Top 500. But amongst them top schemes are again SBI Tax Advantage Fund-Series -III-Regular, SBI Tax Advantage Fund-Series -II-Regular, Regular. These schemes were those which had beaten the Benchmark index. Thus, these schemes come to be a more robust investment avenue to take a position  with.

 It’s also observed that the schemes that are found to be more risky and which carried maximum deviation in their returns are  BOI AXA Tax Advantage Fund ,IDFC Tax Advantage Fund  and Nippon India Tax Saver fund  .These all schemes indicate relatively high volatility  . whereas Franklin India Tax Shield seems to be  least risky scheme with lowest standard deviation of 10.94.


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