A Study Of Technical And Risk Parameters To Be Considered By Retail Investors: An Analysis Of ELSS Mutual Funds

Abstract

Many investors are convinced about investing in ELSS funds also known as tax saving mutual funds but they hit a roadblock when they have to select a right fund. It’s usually seen that the perception of investors is to blindly invest for their medium to long term goals with tax saving as per the ratings and rankings published by various agencies. There are many funds with various styles of investments and strategies which add to the confusion. Clearly, a retail Investor is poorly equipped to do number crunching and analysing fund’s risk, performance and returns. The main aim of this research paper is to establish a basic and advanced methodology in an unembellished manner to help an investor select a right investment. The study considered 35 open-ended ELSS funds as on 18^th July 2021 and analysed them on 3 scales. Firstly, past performance of funds to its mean monthly performance, vis-à-vis to peer group, against category average in 3 years lump sum and SIP returns. Secondly with risk factors like beta, alpha, standard deviation. Thirdly, multiple risk-reward ratios like Sharpe ratio, Treynor ratio, Sortino ratio, Information ratio, Upside and downside capture ratio. By analysing the above parameters and basis the cumulative score it is concluded that Mirae tax saver, CanaraRobeco equity tax saver fund, Quant tax plan are best rated funds and Indiabulls tax saving fund, HDFC taxsaver, Nippon India tax saver fund and Sundaram diversified equity fund are not apt for investment in ELSS category.