Performance Evaluation of ELSS Mutual Funds in India: A Characteristic Based Approach

Abstract

As the mutual fund industry has grown intensely over the past decades, numerous questions have arisen about the nature of operations and the fund characteristics affecting their performance. With the growing popularity and trend of investment in a mutual fund, investors need to know the fund attributes affecting their performance before making investment decisions. The performance evaluation process helps investors know more about the funds and their performance. This research paper generates knowledge of the Indian mutual fund industry with the characteristics-based framework. It attempts to study the performance evaluation of equity-linked savings schemes (ELSS) under equity funds against NIFTY 50 as the benchmark. The funds' daily returns and index returns are collected for all the 39 open-ended ELSS mutual funds listed on AMFI for the years 2010-2020. The study benefits fund managers and investors by highlighting the significance of characteristics influencing the fund performance. The study employs pooled time-series and cross-sectional regression analysis to investigate the relationship between a fund's risk-adjusted return and specific fund attributes. It focuses on various fund attributes such as fund size, expense ratio, age, turnover, and liquidity. The robustness of the results is checked under residual diagnostics. Results show the importance of performance persistence in the ELSS mutual funds.