A Comprehensive Evaluation of Select Large Cap and ELSS Funds Using Formula Based Risk Adjusted Performance Measures

The present study makes an attempt to compare large cap schemes and the Equity Linked Savings Scheme (ELSS) of four mutual funds to determine whether investment in large cap schemes is justified from a long-term perspective or ELSS could provide an ideal substitute for these schemes especially for a tax-savvy investor. The study compared the two categories of schemes on different formula based risk adjustment performance yardsticks which included popular traditional risk adjusted measures like Sharp, Treynor and Jensen ratios and alternative risk measures (downward risk/volatility measures). The funds selected were also compared against two benchmarks; one was the popular S&P CNX Nifty and second was the S&P 500, the broader index. The data has been collected as daily returns for these funds for the five-year period April 1, 2009 to March 31, 2014. The results of the study showed that performance of large cap funds has fallen short of the performance of ELSS funds when comparison was made on the above-mentioned yardsticks. The conclusion drawn is that the ELSS funds are not merely tools of saving tax under Section 80C of the Income Tax Act but also provide fairly decent returns over the long term period, which according to our results are even higher than the otherwise popular large cap funds