The loss of indexation benefit for debt mutual funds has left investors scrambling for alternative products that offer favourable tax treatment. Equity-savings funds have emerged as a sought-after choice for many investors.
Investment approach
Equity-savings funds belong to the hybrid category. According to the Securities and Exchange Board of India’s (Sebi) definition, they must have at least 65 per cent of their portfolio in equity and equity-related instruments and a minimum of 10 per cent in debt instruments. “Most funds in this category have equity exposure between 20 and 40 per cent. Then they use arbitrage to reach the 65 per cent mark. The remaining is invested in debt,” says Arun Kumar, head of research, Fundsindia.com.
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