​​​Good Time for Investing in ELSS

Fall in equity market, extension of tax deadline shore up the avenue’s appeal

​As the Covid-19 pandemic roils the equity markets, investors with some appetite for risk and a long-term investment horizon have the opportunity to tap into the attractive valuations by investing in equity linked savings schemes (ELSS)

What’s more, with the government extending the deadline for filing of tax returns, ELSS investors can also claim tax breaks on these investments under Section 80C.

Market downturns an opportunity to invest

Market downturns are opportunities to invest, financial advisors and successful investors tell us. Only, it is equally critical that these equity investments be made for the long term, in order to maximise returns.

Let us, for instance, look at the ELSS units an investor would have bought if he had invested in the S&P BSE Sensex over a one-year period through April this year, when the market saw both record highs and lows. As the following graph shows, the investor bought more units whenever the underlying market fell, and vice-versa.


Source: BSE

Now, to understand the power of long-term equity investments in market bear phases, let us look at someone who made 10-year investments through the peaks and troughs of the 2008-09 Global Financial Crisis.​​

Equity returns in different market phases

Source: BSE

As can be seen, while all investments yielded positive returns over the long term, it was the investments duri​​ng the bear phases of the market that fetched the highest returns.

In conclusion

The financial year-end typically sees a rush to invest in tax saving instruments. However, with the pandemic taking hold, and the lockdown announced at the fag-end of March, such investors would have missed the chance to invest.

The extension of timeline for filing tax returns is, therefore, a godsend opportunity. It is imperative that investors seize the chance to invest in the ELSS fund of their choice with an eye on both tax saving and wealth creation, ideally with a long-term horizon.

Disclaimer:Any comparison/data mentioned in this​ material is for general information only and not intended to be relied upon as investment advice and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Information and content herein have been provided by CRISIL Research, a Division of CRISIL Limited, and is to be read from an investment awareness and education perspective only. Recipient are advised to seek independent professional advice before making any investments. The views / content expressed herein do not constitute the opinions of SBI Mutual Fund or recommendation of any course of action to be followed by the reader. SBI Mutual Fund / SBI Funds Management Private Limited is not guaranteeing or promising or forecasting any returns.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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