Motilal Oswal ELSS Tax Saver Fund: One of the best performing tax saver funds

We are in the third quarter of this financial year (FY 2023-24 / AY 2024-25). If you have not made you tax planning investments in this financial year, now is a good time to plan your 80C investments. You can claim up to Rs 150,000 deduction from your taxable income by investing in schemes eligible under Section 80C of Income Tax Act. For investors with moderately high to high risk appetites, mutual equity linked savings schemes (ELSS) are one of the best 80C investment options for wealth creation. In this article we will review Motilal Oswal ELSS Tax Saver Fund, previously known as Motilal Oswal Long Term Equity Fund.

If you invested Rs 10,000 per month in Motilal Oswal ELSS Tax Saver Fund through Systematic Investment Plan (SIP) 5 years back, your investment would have grown in value to nearly Rs 9.5 Lakhs by now (XIRR of 18.6%). The chart below shows the growth of Rs 10,000 monthly SIP investment in Motilal Oswal ELSS Tax Saver Fund over the last 5 years compared to Public Provident Fund. You can see that Motilal Oswal ELSS Tax Saver Fund created much more wealth than PPF.

Source: Advisorkhoj Research, as on 29^th September 2023. Disclaimer: Past performance may or may not be sustained in the future. Unlike PPF, mutual funds are subject to market risks. Consult with your financial advisor before investing.

Rolling Returns

The chart below shows the 3 years rolling returns of Motilal Oswal ELSS Tax Saver Fund versus the category average rolling returns since inception. We are analyzing 3 year rolling returns of the scheme versus benchmark because ELSS funds have a 3 year lock-in period; investors need to remain invested for at least 3 years in ELSS. You can see that, Motilal Oswal ELSS Tax Saver Fund had consistently outperformed the ELSS category for many years since its inception. It underperformed 2020, 2021 and 2022. However the fund has made a strong comeback in 2023, and is among the top 3 ELSS funds in terms of performance in the last 1 year.

Source: Advisorkhoj Research, as on 29^th September 2023. Disclaimer: Past performance may or may not be sustained in the future. Consult with your financial advisor before investing.

Lumpsum Returns since inception

The chart below shows the growth of Rs 1 Lakh lump sum investment in Motilal Oswal ELSS Tax Saver Fund since inception. You can see that your investment would have multiplied nearly 3.5 times over the last 8 years (CAGR of 15%).

Source: Advisorkhoj Research, as on 29^th September 2023. Disclaimer: Past performance may or may not be sustained in the future. Consult with your financial advisor before investing.

Wealth Creation through SIP

The chart below shows the return of Rs 10,000 monthly SIP in Motilal Oswal ELSS Tax Saver Fund since inception. With a cumulative investment of around Rs 10.5 lakhs you could have accumulated more than Rs 20.7 lakhs over the last 8 years or so (XIRR of 14.9%). The SIP return of the fund is a testimony of its wealth creation potential over long investment horizons.

Source: Advisorkhoj Research, as on 29^th September 2023. Disclaimer: Past performance may or may not be sustained in the future. Consult with your financial advisor before investing.

Motilal Oswal QGLP Investment Framework

Motilal Oswal ELSS Tax Saver Fund – Market Cap Strategy

The fund maintains around 50% exposure to large caps and 50% to mid and small caps (see the chart below).

Source: Motilal Oswal AMC, as on 29^th September 2023.

Motilal Oswal ELSS Tax Saver Fund – Current Portfolio Strategy

• Healthcare Ecosystem (Overweight on Healthcare) - As a proxy to domestic consumption. Playing it across healthcare spectrum – Pharma, Hospitals, Health Insurance & Diagnostics


• Consumption (Overweight on Consumption) - Preference towards discretionary over staples. Laddered exposure


• Capex/ Industrials - Gradually increasing exposure to Capex and Industrials


• Lenders (Overweight on Lenders) - Relatively reasonable valuation & best sector to play macros


• The fund is currently Underweight on IT

Why Motilal Oswal ELSS Tax Saver Fund for your 80C tax savings?

• Historical data shows that Equity Linked Savings Scheme has one of the highest wealth creation potential among all 80C investment options.


• ELSS with a lock-in period of just 3 years is also the most liquid investment options of all the 80C schemes.


• ELSS is also one of the most tax friendly investment options under Section 80C. Capital gains of up to Rs 1 lakh is tax exempt and taxed at 10% thereafter.


• Motilal Oswal ELSS Tax Saver Fund has a strong track record of wealth creation over the last 8 years.


• The fund maintains a balance between large caps and mid/small caps. The large cap portion of the portfolio will provide relative stability in volatile markets, while the mid/small caps portion can create alphas over long investment horizon.


• The recent correction in equities can provide attractive investment opportunities for investors with long investment horizon.

Who should invest in Motilal Oswal ELSS Tax Saver Fund?

• Investors looking for tax savings under Section 80C and also capital appreciation over sufficiently long investment tenures.


• You need to have minimum 3 year investment tenure for this scheme since you will not be able to redeem units of the scheme before three years. However, we recommend 5 years or longer investment horizons for this scheme.


• If you are investing in this scheme through SIP, each SIP instalment will be locked in for 3 years. You need to plan your investments accordingly.


• You need to have moderately high to high risk appetites for this scheme.


• Investors should consult with their mutual fund distributors or financial advisors, if Motilal Oswal ELSS Tax Saver Fund is suitable for their tax planning needs.