Samco mutual fund is set to launch a mid- and small-cap-focused equity-linked savings scheme (ELSS) tax saver fund. The new fund offering (NFO) will open from November 15 to December 16, 2022.
ELSS schemes provide tax deductions up to Rs 1.5 lakh per year under section 80C of the Income Tax Act.
Viraj Gandhi, chief executive officer (CEO) of Samco AMC, unveiling the fund, said, "the ELSS fund would be investing predominantly in high-potential mid and small-cap companies."
Currently, there are 39 ELSS schemes in the market, and their most significant value proposition is the tax benefit. However, they have invested only 18 per cent and 10 per cent in mid-cap and small-cap, respectively, while 72 per cent of ELSS schemes are invested in large-cap stocks.
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Contrary to popular belief that mid-cap and small-cap are high risks, Nifty Mid-Cap 150 Index soared 97.13 per cent in the last three years, and the Nifty Small-Cap Index 250 jumped 98.51 per cent, while the Nifty 50 is up by 49.9 per cent in the same period. From 2006 to 2021, Nifty Mid-Cap 150 generated an average of 8 per cent alpha.
"The large-cap stocks were once mid-caps. This transition from mid-cap to large-cap creates immense wealth for investors," said Umesh Kumar Mehta, Samco's chief information officer (CIO).
The Samco ELSS Tax Saver Fund offers tax benefits under Section 80C and exposure to growing mid and small-cap businesses.
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He said the idea is to enable investors to be a part of India's growth story through investments in mid-cap and small-cap companies of niche sectors, as they could become the future drivers of economic growth.
The fund house said volatility in these segments could reduce significantly in a three-year horizon. Thus, mid-and-small cap stocks handpicked from a vast pool can create a high-return portfolio.
It plans to use a patented technology-driven method called HexaShield Framework to rigorously gauge various parameters of the companies to create a pool of 180 growth-oriented, efficient stocks with a high adjusted return on capital employed.
Since April 2005, the Nifty Mid and Small Cap 400 index returned 8 per cent more than the Nifty 500 index on a three-year rolling returns basis.
Most ELSS funds in India have significant exposure to large-cap equities, and their top holdings typically comprise mostly the same stocks. As a result, it might be difficult for an investor to distinguish one fund from another. However, the fund said Samco Tax Saver Fund is unique in that it has exposure predominantly in mid-cap and small-cap high-growth stocks.
