Capital markets regulator Sebi’s move to allow mutual funds to launch passively managed Equity-Linked Savings Schemes (ELSS) will provide a cost-effective and tax-saving alternative to individual investors, experts said on Tuesday.
Apart from these, Sebi has put in place a framework for managing passive funds -- Exchange Traded Funds (ETFs) and Index Funds -- amid growing popularity of such funds as an investment product for retail investors.
Sebi, in its circular, on Monday said mutual funds can either launch an actively-managed ELSS scheme or a passively-managed one but not in both categories.
The passive ELSS scheme should be based on one of the indices comprising equity shares from top 250 companies in terms of market capitalisation.
Piyush Gupta, Director - Funds Research, Crisil Ltd, said that Sebi’s move to push passive debt funds is doubly beneficial.
One, it will offer a low-cost option to those seeking to invest in actively managed fixed-income-oriented funds.
Two, it will engender liquidity for such products that, in turn, would deepen India’s corporate bond market, he added. “The advent of passively managed ELSS provides a cost and tax-saving alternative to individual investors,” he said.