DSP-ML Tax Saver Fund – Should you buy?

Source: moneycontrol


DSPML has come out with DSP-ML Tax Saver Fund, the first open-ended Equity Linked Saving Scheme (ELSS) from the fund house. (Note that every mutual fund can have one open-ended tax saving scheme (ELSS) and other ELSS NFOs have to be mandatorily close ended.)


DSP-ML Tax Saver Fund offers deduction under Sec. 80C and the minimum lock-in period would be three years as in any other ELSS. Investment expert Sandeep Shanbhag believes that this enforced lock-in offers the opportunity to the fund manager to take long-term calls without having to worry about creating liquidity for daily redemptions. “To that extent, the performance of ELSS funds in general have been better than their open ended counterparts”, he added.

Advisor Hemant Rustagi feels, “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.”
However, on the flipside Rustagi says, “Though ELSS have the potential to give better return compared to other options under Section 80C, there is definitely some risk attached to it.” “This can, however, be tackled by investing thru SIP”, he added.
Experts also feel that DSP-ML Tax Saver 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 New Fund Offers (NFOs) that have no special selling proposition.
In reply, the fund house states, “When investing in NFO’s it is also important for investors to look at the track record of the fund house in managing asset classes. DSPML Fund Managers has a consistent track record when it comes to equity fund management. DSP Merrill Lynch Fund Managers Ltd was declared the best equity fund group over 3 years at the Lipper India Fund Awards 2006. DSP Merrill Lynch Equity Fund was among four schemes that won the CNBC TV18 - CRISIL Mutual Fund of the Year Award – 2006.More recently, DSPML Opportunities Fund and DSPML India T.I.G.E.R. Fund, two of our top-performing equity funds, have been recognised for their outstanding performance. Both these schemes have been ranked CRISIL CPR 1.”


1-year
3-year
Assets

Existing Equity Diversified Schemes
Returns *
Rank *
Returns *
Rank *
(Rs in cr)
DSP-ML Equity Fund
49.4
30 / 132
49.4
Sep-66
652
DSP-ML India T.I.G.E.R. Fund (G)
59
9 / 132
59
N.A.
1,182
DSP-ML Opportunities Fund (G)
49.2
31 / 132
49.2
Nov-66
1,282
DSP-ML Top 100 Equity Fund (G)
51.1
29 / 132
51.1
28 / 66
292
* Figures as on November 30, 2006




Conclusion:
Experts believe that, “If an investor decides to invest in this fund, he will have to go by the track record of the existing funds of the fund house to assess its capabilities. On the other hand, some of the existing ELSS has an excellent track record. One can look at the quality of the portfolio and the extent of exposure to different market caps in these funds and then take a decision.”
- Reena Prince