Axis Long Term Equity Fund: A good tax saver fund to invest in for FY 2021 22

What are Equity Linked Savings Schemes?

Equity Linked Savings Schemes are mutual fund schemes which qualify for tax savings under Section 80C of Income Tax Act, 1961. You can claim up to Rs 1.5 lakhs deduction from your taxable income by investing in ELSS. ELSS investments have a lock-in period of 3 years. If you are investing in ELSS through Systematic Investment Plans, each SIP installment will be locked in for 3 years from the date of investment. Historical data shows that ELSS has been the best performing tax saving investment for wealth creation over a sufficiently long investment horizon.

In this post, we will review Axis Long Term Equity Fund, one of the top performing ELSS in the last 10 years.

About the scheme

Axis Long Term Equity Fund was launched 12 years ago in December 2009. The scheme is an ELSS fund and qualified for deductions u/s 80C of The Income Tax Act 1961. It is one of the most popular tax saver mutual funds with Rs 33,529.42 Crores of Assets under Management (AUM), as on 30^th November 2021.

The expense ratio of the scheme is 1.58%. Jinesh Gopani has managed the scheme for more than 10 years. We have seen the long continuity of a fund manager with a scheme often results in superior performance in the long term.

The chart below shows the growth of Rs 10,000 lump sum investment in Axis Long Term Equity Fund versus the scheme benchmark S&P BSE 200 TRI over 10 years period. You can see that the scheme has outperformed the benchmark and created alphas for investors. Axis Long Term Equity Fund has given north of 20% CAGR returns in the last 10 years. Return of the scheme since inception is 18.27%.

Source: Advisorkhoj Research– Data as on Dec 13, 2021

Rolling Returns

Regular Advisorkhoj readers know that we give great importance to rolling returns as anunbiased measure of fund performance. A fund may outperform or underperform versus its benchmark index depending on the market conditions and stock selection strategy of the fund manager. But rolling returns show the performance of the fund across different market conditions. The chart below shows the 3 year rolling returns of Axis Long Term Equity Fund versus its benchmark S&P BSE 200 TRI since the inception of the scheme. We have chosen a 3 year rolling returns period because ELSS funds have a lock-in period of 3 years.

Source: Advisorkhoj Rolling Returns Calculator – Data as on Dec 13, 2021

You can see that Axis Long Term Equity Fund was able to beat its benchmark index most of the time across different market conditions over the years. The scheme has never given negative returns over 3 year investment tenures since its inception. The scheme has given 12%+ CAGR returns over 3 year investment tenures, over 72% of the times since its inception. Consistency is one of the most important attributes of fund manager performance.

Axis Long Term Equity Fund is one of the most consistent ELSS funds. Let us now see how Axis Long Term Equity Fund performed against the ELSS category, in terms of 3 years rolling returns over the last 10 years. Investors can see that Axis Long Term Equity Fund was able to outperform the category consistently across different market conditions over the 10 years period.

Source: Advisorkhoj Rolling Returns Calculator - Data as on Dec 13, 2021

SIP Returns

The chart below shows the growth of Rs 10,000 monthly SIP investment in Axis Long Term Equity Fund (Growth Option) versus itsbenchmark index over the last 10 years. With a cumulative investment of Rs 12 lakhs you could have accumulated a corpus of Rs 33.1 lakhs. The annualized SIP returns (XIRR) over the last 10 years was 19.3%

Source: Advisorkhoj Research - Data as on Dec 13, 2021

Performance versus PPF

The chart below shows the growth of Rs 10,000 monthly SIP investment in Axis Long Term Equity Fund (Growth Option) versus Public Provident Fund (PPF) over the last 10 years. You can see that in terms of long term returns Axis Long Term Equity Fund has outperformed PPF in terms of wealth creation. However, investors should understand that, Axis Long Term Equity Fund being a market linked scheme is subject to market risks, while PPF being a Government Small Savings Scheme is risk free. You should invest according to your risk appetite.

Source: Advisorkhoj Research - Data as on Dec 13, 2021

Why Axis Long Term Equity Fund?

• Save up to Rs 46,800 in taxes (including Cess) by investing Rs 150,000 in the fund.


• ELSS is the most liquid investment option under Section 80C of Income Tax Act 1961.


• Long term capital gains of up to Rs 100,000 is tax exempt and taxed at 10% thereafter.


• Lock-in period of the 3 years provides higher liquidity compared to other 80C investment options like PPF, NSC, life insurance plans etc.


• Strong track record of long term wealth creation across investment cycles.


• Lock-in period allows fund manager to invest for long term without worrying about redemption pressures.


• Strong performance consistency across different market conditions over sufficiently long investment tenures.


• Large cap orientation (more than 80% of the portfolio) provides stability and limits downside risks.


• Wealth creation through bottom up stock selection in quality business, including tactical allocations to mid and small caps.

The scheme has a lock in period of 3 years, but to get the best returns you should be prepared to remain invested for longer periods of time. Investors should consult with their financial advisors if Axis Long Term Equity Fund is suitable for their tax planning needs.