IIFL Mutual Fund launched its first-of-its-kind “IIFL ELSS Nifty50 Tax Saver Index Fund” on December 01, 2022. The subscription for this new fund offer (NFO) would be open till December 21, 2022, post which it would be available for resale and purchase from January 02, 2023.
This open-ended passively managed equity-linked savings scheme which tracks and replicates the movement of the Nifty50 index would be managed by Parijat Garg. Unlike most other index funds, this fund comes with a statutory lock-in period of three years. This fund will offer tax benefits while helping in wealth creation.
This tax-saver fund is unique in the sense that it is a passively managed index fund with its portfolio resembling the Nifty50 index that consists large-cap Indian firms. Also, this fund is relatively inexpensive considering its expense ratio is reasonably lower compared to most other actively managed funds with higher expense ratios.
Commenting on this NFO, Parijat Garg, Fund Manager, IIFL AMC, said, “The Nifty50 accounts for about 50 percent of India’s market cap. Taking exposure to the Nifty companies through a passive fund is an opportunity for investors to harness the growth potential of equities, reduce tax outgo, lower the cost of investing, and gain diversified exposure.”
Will this investment help?
The recent market downturns have not inhibited investors from putting their money in the stock market. In the past few months, there has been a gradual rise in the number of demat accounts and SIP inflows following, thus, highlighting the increasing conviction of retail investors in equities. Explaining how the growing weight of DIIs in stocks will help push the Indian stock market index, Garg explains, “An offering of this kind was long awaited by the market. Time and again, the Indian equity market has demonstrated formidable resilience against both domestic as well as global headwinds. For investors, one of the ways to leverage the India growth opportunity would be a passive investment with tax-saving benefits. Due to its passive approach, the fund eliminates the selection and behavioural biases that impact investment decision-making.”
Benefiting from this fund
The benefit of investing in this fund is that investors would be putting their money in stocks comprising the Nifty50 Index. The investment in these stocks comprising this index would be similar to the stock percentage in the National Stock Exchange (NSE), thus, enabling returns equivalent to the Total Returns Index of the Nifty50 Index subject to tracking error. Apart, the investors would also be availing of the benefits of deductions on investing in this scheme under Section 80C of the Income Tax Act, 1961. The three-year mandatory lock-in period would ensure that the investors stay invested as opposed to newcomers who jump from one fund to the other on sensing volatility in the stock market.