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Home > Business > Personal Finance

JM Equity Tax Saver Fund - Should you buy?

Reena Prince, | March 24, 2007 10:47 IST

JM Financial Mutual Fund has launched its first Equity Linked Saving Scheme - JM Equity Tax Saver Fund. It is a close-ended plan for a period of three years from the date of allotment of units, and will be converted into an open-ended one at the end of this tenure. Also, like any other ELSS, it offers deduction upto Rs 100,000 under Section 80C.

Commenting on the close-ended nature of the scheme, investment expert Sandeep Shanbhag said, "SEBI regulations state that any AMC can have one open ended tax saving scheme and the rest if any have to be close ended. AMCs seem to be keen on launching close ended schemes possibly as open ended ones cannot charge the 6 per cent upfront issue expenses." (Note that every mutual fund can have one open-ended tax saving scheme and other ELSS NFOs have to be mandatorily close ended. JM Mutual Fund does not have a tax fund in the open-ended category).

On the advantages of investing in ELSS, advisor Hemant Rustagi says, "ELSS is one of the best options among the instruments eligible for tax benefits under section 80C as they provide an opportunity to participate in the equity market and also help save taxes while doing so."

Though experts believe that JM Equity Tax Saver Fund can be a good way for investing in equity, they have their concerns:

JM Equity Tax Saver Fund NFO vs Existing ELSS

Experts feel that JM-ETSF does not have any unique feature that other ELSS funds do not possess, and as an investment strategy, investors would be better off investing with ELSS funds with a proven track record instead of taking part in a New Fund Offer that has no special selling proposition.

Sandip Sabharwal, CIO - Equity at JM Financial MF counters, "Several tax saving funds have been launched over the last few years and some of the new ones have done very well and on the other hand a large number of old funds have continued to perform well. Hence it cannot be conclusively said that an older fund will do better than a new one."

Unimpressive track record of existing JM schemes:

If one were to rely on the track record of the fund house to assess its fund management capabilities, one would be disappointed. "The performance of the existing equity schemes of JM MF hasn't been spectacular as compared to others in the same space", says Shanbhag.

However, he adds, "On the positive side, Sandip Sabharwal whose funds at SBI AMC had performed brilliantly is the chief investment officer at JM MF, and going by his past track record, equity schemes offered by JM MF could prove to be star performers. Only time will tell."

Sabharwal adds, "The investment team and processes at JM Mutual fund have been restructured recently and the impact of the same on the performances of the schemes will be reflected over the next 3-6 months."

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