|
The mutual fund industry emerged in 1964 in India and has developed enormously since
then. It is a general idea that through diversified portfolio mutual funds could give returns
with low risk than the market risk and the volatility of the mutual fund market is less than
the stock market. An investor who invests in stock market needs to monitor the market on
a regular basis, while those who invest in mutual fund need not watch the market movement
for reducing losses. The fund manager of every asset management company takes care of the
investors’ money. They diversify the investors’ money into various sectors like oil, bank,
automobile, information technology, agriculture, etc. The return from this diversified
portfolio is distributed among all the investors. Hence mutual fund provides nominal return
with lower risk. Tax-saving mutual funds are one of the investment avenues with multiple
features like exemption on tax payment, market-related return, safety and security.
A majority of tax assessees like to save their money without paying tax. To escape from tax
payment they have to invest the required amount in tax-shielded avenues. Along with tax
exemption, they expect return out of it. By investing in tax-saving mutual funds, the investors
can avail a tax exemption of 100,000 under 80 C of Income Tax Act, 1961.
India has 32 growth-oriented open-ended Equity Linked Savings Schemes (ELSS) of taxsaving
mutual funds. This study evaluates the performance of tax-saving mutual funds for
the last six-year period from 2006-07 to 2011-12. The study utilizes the benchmark index
An Analysis of Risk-Adjusted Return on Tax-Saving Mutual Fund Schemes in India 55
S&P CNX NIFTY to compare mutual fund performance. The rest of the paper is organized as
follows: it summarizes the related literature on mutual fund performance, followed by
presentation of data and methodology. Subsequently, it presents the results of the tax-saving
mutual funds performance analyses, and finally, offers the conclusion.
|
