As 2024 comes to a close, investors have reason to celebrate, especially those who parked their money in Equity Linked Savings Schemes (ELSS). Combining the dual benefits of tax savings and wealth creation, these funds have delivered remarkable returns this year. Among them, the Motilal Oswal ELSS Tax Saver Fund stands out with an impressive 45% return, setting a benchmark for other schemes in this category. Let’s look closer at the performance of the top 5 ELSS mutual funds in 2024.
What are ELSS Funds?
ELSS or Equity Linked Savings Schemes are diversified equity mutual funds with a mandatory three-year lock-in period. Investments in ELSS are eligible for tax deduction under Section 80C of the Income Tax Act, 1961, up to ₹1.5 lakh annually. These funds primarily invest in equity and equity-related instruments, making them an attractive option for long-term investors seeking higher returns and tax benefits.
Highlights of ELSS Performance in 2024
- Robust Market Rally: This year’s strong equity market rally propelled ELSS returns to double digits.
- Sectoral Gains: Major gains came from sectors like banking, IT, pharma, and manufacturing, with mid-cap and small-cap segments outperforming significantly.
- Consistency: The top-performing ELSS funds have consistently outperformed their benchmarks, delivering returns exceeding 25% in most cases.
Top 5 ELSS Funds of 2024
Motilal Oswal ELSS Tax Saver Fund
- 2024 Return: 45%
- Key Highlights: This fund has benefitted from its high-conviction bets in banking, IT, and mid-cap sectors. Managed with a focused portfolio strategy, the fund’s ability to identify growth opportunities has significantly rewarded its investors.
- Why It Stands Out: Its concentrated approach and low churn have allowed it to capture gains from long-term growth stories.
Mirae Asset Tax Saver Fund
- 2024 Return: 36%
- Key Highlights: Mirae Asset Tax Saver Fund’s disciplined investment strategy focuses on large-cap and mid-cap growth companies, ensuring stable and consistent performance.
- Why It Stands Out: Its diversification across sectors and robust stock selection process make it a favorite among investors.
Axis Long-Term Equity Fund
- 2024 Return: 32%
- Key Highlights: This fund, biased towards quality large-cap stocks, has delivered steady returns while maintaining a low-risk profile.
- Why It Stands Out: Its emphasis on the quality and sustainability of earnings helps it effectively navigate market volatility.
DSP Tax Saver Fund
- 2024 Return: 30%
- Key Highlights: Known for its tactical asset allocation and diversified portfolio, the DSP Tax Saver Fund has managed to capitalize on opportunities in both large-cap and mid-cap segments.
- Why It Stands Out: Its balanced approach and ability to adapt to market changes have ensured consistent returns.
Canara Robeco Equity Tax Saver Fund
- 2024 Return: 28%
- Key Highlights: This fund’s focus on high-quality large-cap stocks and strategic exposure to mid-cap opportunities has proven rewarding.
- Why It Stands Out: Its strong research-driven approach and prudent risk management have been instrumental in its success.
Key Factors Driving ELSS Performance in 2024
- Economic Growth: A robust post-pandemic recovery fueled corporate earnings growth, boosting equity markets.
- FII Inflows: Consistent foreign institutional investor (FII) inflows supported market liquidity, benefiting ELSS funds.
- Policy Support: Pro-growth government policies, including infrastructure investments and tax reforms, catalyzed market performance.
- Sectoral Outperformance: Select sectors, such as BFSI, IT, and manufacturing, led the rally, contributing to ELSS gains.
Should You Invest in ELSS Funds?
ELSS funds are compelling for investors looking to combine tax-saving benefits with long-term wealth creation. Here are a few considerations:
- Risk Appetite: As equity-oriented funds, ELSS comes with market risks. Investors should have a long-term perspective.
- Tax Benefits: Investments up to ₹1.5 lakh in ELSS qualify for tax deductions under Section 80C.
- Lock-in Period: A three-year lock-in ensures disciplined investing and benefits the fund from market cycles.
Conclusion
The stellar performance of ELSS funds in 2024 underscores their potential as a powerful investment vehicle for tax-saving and wealth creation. Funds like the Motilal Oswal ELSS Tax Saver Fund have demonstrated that these schemes can deliver exceptional returns with the right strategy and market conditions. As we head into 2025, investors should carefully evaluate their financial goals and risk tolerance before adding ELSS funds to their portfolios.
Investing in ELSS funds through the Systematic Investment Plan (SIP) route can enhance returns by averaging market volatility and instilling financial discipline. With their dual benefits and proven performance, ELSS funds remain a top choice for savvy investors looking to build wealth while saving on taxes.