Top ELSS Mutual Funds in March 2025 Based on 3-Year Returns

Equity Linked Savings Schemes (ELSS) continue to be a preferred choice for investors seeking tax benefits under Section 80C of the Income Tax Act while aiming for long-term capital appreciation. The following ELSS funds have been ranked based on their 3-year returns, with alpha values indicating the fund’s ability to outperform its benchmark.

Data as of March 12, 2025

Performance Analysis of Top ELSS Funds

• SBI Long Term Equity Fund, managed by Dinesh Balachandran, has delivered an alpha of 2.93, demonstrating strong active management and stock selection.
• HDFC ELSS Tax Saver, under Roshi Jain, has an alpha of 2.27, reflecting the fund’s consistent performance over the last three years.
• Motilal Oswal ELSS Tax Saver Fund, managed by Ajay Khandelwal, Atul Mehra, and Rakesh Shetty, leads with an alpha of 3.58, indicating a significant outperformance over its benchmark.
• ICICI Pru LT Wealth Enhancement Fund, led by Rajat Chandak, has an alpha of 0.88, while ITI ELSS Tax Saver Fund, co-managed by Alok Ranjan and Dhimant Shah, has an alpha of 1.26.

ELSS Funds: A Tax-Efficient Investment Avenue

ELSS funds are unique among mutual funds as they offer tax deductions of up to ₹1,50,000 per financial year under Section 80C. These funds come with a mandatory 3-year lock-in period, which is the shortest among tax-saving investment options.

The presence of a lock-in period allows fund managers to take long-term positions without worrying about short-term redemptions. This, in turn, enables better portfolio stability and potential for long-term wealth creation.

Understanding Alpha in Mutual Funds

The alpha value measures how well a mutual fund has performed relative to its benchmark. A positive alpha indicates that the fund has outperformed the market, while a higher alpha reflects better active management.

Among the top ELSS funds listed, Motilal Oswal ELSS Tax Saver Fund has the highest alpha, indicating stronger fund manager decisions. Funds with moderate to high alpha often showcase better stock selection and efficient risk management, contributing to long-term performance.

Factors Influencing ELSS Performance

The overall performance of ELSS funds is influenced by multiple factors, including equity market trends, economic conditions, and fund management strategies. A well-diversified portfolio and sectoral allocations play a crucial role in determining returns.

While past performance does not guarantee future results, the consistency in delivering positive alpha highlights the strength of active fund management. Investors tracking ELSS funds often assess historical performance, fund manager expertise, and portfolio diversification before making investment decisions.

Conclusion

The rankings based on 3-year returns indicate that SBI Long Term Equity Fund, HDFC ELSS Tax Saver, and Motilal Oswal ELSS Tax Saver Fund have shown strong outperformance. These funds have demonstrated their ability to navigate market fluctuations effectively.

With ELSS funds offering the dual benefit of tax savings and long-term capital growth, their importance in investment portfolios remains significant. As market conditions evolve, fund manager strategies and stock selection will continue to play a vital role in shaping returns within this category.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.