Best ELSS Mutual Funds: DSP ELSS Tax Saver Fund vs Nippon India ELSS Tax Saver Fund
Mitali Dhoke
Aug 02, 2024 / Reading Time: Approx. 15 mins
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As the ITR filing season for the financial year 2023-24 wraps up, many investors are already shifting their attention to the upcoming fiscal year. The tax-saving rush, which often sees individuals scrambling to maximise deductions before the deadline, underscores the importance of early planning.
Now is the ideal time to focus on tax-saving strategies for FY 2024-25 to avoid the last-minute rush and ensure a well-structured financial plan. In the quest for effective tax-saving options, Equity Linked Savings Schemes (ELSS) are a popular choice due to their dual benefits of tax deductions under Section 80C and potential for significant capital appreciation.
However, with a plethora of ELSS funds available, selecting the right one for your portfolio can be a daunting task. Choosing the best ELSS mutual funds requires more than just a glance at historical returns. It involves analysing various factors such as the fund's investment approach, expense ratio, risk factors, and how it aligns with your long-term financial goals.
[Read: How to Select the Best Suitable Tax-saving Option for You]
In recent years, there has been a noticeable shift towards more sophisticated investment strategies within the ELSS category. Fund managers now incorporate a blend of growth and value investing, sector rotation, and dynamic asset allocation to enhance returns and manage risk. This evolution is driven by the growing sophistication of investors and the competitive landscape among fund houses.
Regulatory changes have also impacted the ELSS landscape. The introduction of the new tax regime and amendments in tax laws have influenced how investors approach tax-saving investments. The growth of the ELSS space reflects a broader trend of increasing investor confidence in equity markets and mutual funds.
As investors continue to seek opportunities for both tax savings and wealth creation, ELSS funds are likely to remain a pivotal component of financial planning.
Note: In my previous mutual fund comparison articles, I have covered a comprehensive analysis of the few Best ELSS Mutual Funds for 2024; you may consider reading -
Top ELSS Mutual Funds: HDFC ELSS Tax Saver Fund vs Quant ELSS Tax Saver Fund
Choosing the Right ELSS: SBI Long Term Equity Fund vs Mirae Asset ELSS Tax Saver Fund
Parag Parikh ELSS Tax Saver Fund vs Kotak ELSS Tax Saver Fund: Pick Your Tax-Saving Option
This article provides an in-depth comparative analysis of two prominent ELSS funds in India: DSP ELSS Tax Saver Fund and Nippon India ELSS Tax Saver Fund. Both funds boast impressive track records and favourable tax benefits and cater to long-term wealth creation. But which one aligns best with your investment goals and risk appetite?
# - DSP ELSS Tax Saver Fund
DSP ELSS Tax Saver Fund is an open-ended equity scheme that belongs to DSP Mutual Fund. It is a well-established tax-saving mutual fund scheme launched in January 2007 and currently has an AUM of Rs 16,283.78 crore (as of June 30, 2024).
The scheme is a popular choice among investors seeking tax benefits and the potential for long-term capital appreciation. It aims to generate form a well-diversified portfolio comprising predominantly of equity & equity-related instruments across market capitalisation, and it enables investors to avail of a deduction from total income, as permitted under the Income Tax Act, 1961, from time to time.
DSP ELSS Tax Saver Fund is benchmarked against NIFTY 500 - TRI as a primary index. Being a tax-saving scheme, it has a mandatory lock-in period of 3 years, making it suitable for long-term investors.
# - Nippon India ELSS Tax Saver Fund
Nippon India ELSS Tax Saver Fund is an open-ended equity scheme and belongs to Nippon India Mutual Fund. It is a popular tax-saving scheme launched in September 2005 and currently holds an AUM of Rs 15,916.96 crore.
Nippon India ELSS Tax Saver Fund is a compelling option for investors seeking tax benefits along with the potential for substantial long-term returns. Its diversified portfolio and consistent performance make it a strong contender in the ELSS category.
Nippon India ELSS Tax Saver Fund is benchmarked against NIFTY 500 - TRI as a primary index. Being a tax-saving scheme, it has a mandatory lock-in period of 3 years, making it suitable for long-term investors.
Investment Style and Philosophy:
DSP ELSS Tax Saver Fund: The fund's investment philosophy emphasises quality stocks with strong growth prospects. The fund management team conducts thorough research to identify companies with sustainable competitive advantages.
While the fund may have a bias towards large-cap companies for stability and steady returns, it does not restrict itself to any specific market capitalisation. The fund manager may also invest in mid-cap and small-cap stocks if they present attractive growth opportunities.
Nippon India ELSS Tax Saver Fund: The fund focuses on identifying high-growth companies with strong fundamentals and potential for significant capital appreciation. It looks for companies with robust earnings growth, sustainable competitive advantages, and scalable business models.
The fund employs a bottom-up approach to stock selection, where individual company analysis is prioritised over broader macroeconomic factors. This involves in-depth research and evaluation of a company's financial health, management quality, business model, and market position.
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Performance Comparison: Scheme Returns
Data as of June 30, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
As we can see from the above table, both schemes outperformed their category average in all time periods. DSP ELSS Tax Saver Fund has consistently outperformed Nippon India ELSS Tax Saver Fund across all time periods.
Over the three-year period, the Nippon India ELSS Tax Saver Fund has a slight edge with a CAGR of 24.03%, compared to the DSP ELSS Tax Saver Fund's 23.20%. Despite this, DSP's performance remains strong and competitive. Over a five-year horizon, the DSP ELSS Tax Saver Fund shines with a CAGR of 20.16%, significantly outperforming the Nippon India ELSS Tax Saver Fund's 14.99%. This indicates a consistent ability for DSP to generate superior returns over the medium term.
When compared to the ELSS category average, both funds have shown mixed performance. While DSP ELSS Tax Saver Fund has outperformed the category in the long term, Nippon India ELSS Tax Saver Fund has lagged behind.
Both DSP ELSS Tax Saver Fund and Nippon India ELSS Tax Saver Fund have delivered decent returns, although their performance has been inconsistent compared to the category average and benchmark. Thus, one may consider other factors, such as portfolio holdings, risk profile, and investment philosophy, before making a decision.
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Portfolio Composition: Asset Allocation of Schemes
Both DSP ELSS Tax Saver Fund and Nippon India ELSS Tax Saver Fund are amongst the popular and best ELSS mutual funds for tax-saving investments, but their asset allocation strategies differ slightly.
Scheme Name |
Large Cap % |
Mid Cap % |
Small Cap % |
Nippon India ELSS Tax Saver Fund |
67.48 |
12.99 |
16.57 |
DSP ELSS Tax Saver Fund |
64.20 |
18.49 |
14.95 |
Data as of June 30, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Both the DSP ELSS Tax Saver Fund and the Nippon India ELSS Tax Saver Fund have a substantial portion of their portfolios invested in large-cap stocks, indicating a focus on stability and established companies. Specifically, the Nippon India ELSS Tax Saver Fund allocates 67.48% to large-cap stocks, slightly higher than the DSP ELSS Tax Saver Fund's 64.20%.
This larger allocation in large-caps suggests that the Nippon India fund might have a slightly more conservative approach, emphasising stability and lower volatility compared to mid and small-cap investments.
Conversely, DSP ELSS Tax Saver Fund has a higher allocation towards mid-cap stocks (18.49%) compared to the Nippon India ELSS Tax Saver Fund (12.99%). The allocation towards small-cap stocks is marginally higher in the Nippon India ELSS Tax Saver Fund (16.57%) compared to the DSP ELSS Tax Saver Fund (14.95%).
The overall asset allocation strategies of both funds reflect their respective approaches to balancing risk and return. The Nippon India ELSS Tax Saver Fund's higher allocation to large-cap and small-cap stocks suggests a strategy that seeks to leverage the stability of large-cap investments while capturing the growth potential of small-caps.
On the other hand, the DSP ELSS Tax Saver Fund, with a higher mid-cap allocation, appears to focus on companies that have the potential to grow significantly but are relatively less volatile than small-caps.
This diversified allocation across different market capitalisations allows both funds to cater to investors with varying risk appetites and investment horizons, aiming for long-term capital appreciation alongside tax benefits.
[Read: 4 Best ELSS for 2024 - Top Performing Tax Saving Mutual Funds in India]
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Market volatility: Risk Profile of Schemes
Investing in ELSS funds offers tax benefits alongside the potential for growth, but understanding their risk-reward profiles is crucial before choosing.
Risk Ratio |
Nippon India ELSS Tax Saver Fund |
DSP ELSS Tax Saver Fund |
Standard Deviation (3 Year) |
14.63 |
14.31 |
Sharpe |
0.34 |
0.33 |
Sortino |
0.69 |
0.68 |
Data as of June 30, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
An investment with high volatility is considered riskier than an investment with low volatility; the higher the Standard Deviation, the higher the risk. Both Nippon India ELSS Tax Saver Fund and DSP ELSS Tax Saver Fund appear to offer a moderate risk-reward profile. The Nippon India ELSS Tax Saver Fund has a slightly higher standard deviation compared to the DSP ELSS Tax Saver Fund over a three-year period. This indicates that the returns of the Nippon India ELSS Tax Saver Fund are slightly more volatile than those of the DSP ELSS Tax Saver Fund.
Both funds have similar Sharpe Ratios, with the Nippon India ELSS Tax Saver Fund at 0.34 and the DSP ELSS Tax Saver Fund at 0.33. This suggests that both funds have been able to deliver comparable risk-adjusted returns. The Sortino Ratio, like the Sharpe Ratio, measures risk-adjusted returns but focuses only on downside volatility, providing a more accurate picture of a fund's performance in terms of downside risk.
The Nippon India ELSS Tax Saver Fund has a Sortino Ratio of 0.69, slightly higher than the DSP ELSS Tax Saver Fund's 0.68. This indicates that both funds manage downside risk effectively, with the Nippon India ELSS Tax Saver Fund having a marginal edge in mitigating losses during market downturns.
Remember, this comparison is just to give you an idea about the risk profile of both the ELSS. Consider your risk tolerance and investment goals to determine which fund aligns better with your investment strategy.
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Top Holdings of the Schemes:
Both DSP ELSS and Nippon India ELSS share some of the same top holdings, including HDFC Bank, ICICI Bank, and Axis Bank.
DSP ELSS Tax Saver Fund |
Nippon India ELSS Tax Saver Fund |
Company |
% Assets |
Company |
% Assets |
HDFC Bank Ltd. |
8.19 |
ICICI Bank Ltd. |
7.39 |
ICICI Bank Ltd. |
6.91 |
HDFC Bank Ltd. |
6.24 |
Axis Bank Ltd. |
3.66 |
Infosys Ltd. |
4.04 |
State Bank Of India |
3.62 |
Axis Bank Ltd. |
3.86 |
Infosys Ltd. |
3.09 |
NTPC Ltd. |
3.71 |
Samvardhana Motherson International Ltd. |
2.73 |
Samvardhana Motherson International Ltd. |
3.59 |
Bharti Airtel Ltd. |
2.64 |
State Bank Of India |
3.36 |
Power Finance Corporation Ltd. |
2.60 |
Reliance Industries Ltd. |
3.15 |
Mahindra & Mahindra Ltd. |
2.28 |
Larsen & Toubro Ltd. |
3.07 |
NTPC Ltd. |
2.07 |
TVS Holdings Ltd. |
2.49 |
Data as of June 30, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Comparing the two funds, both exhibit a preference for blue-chip companies known for their market leadership and stability. However, the DSP ELSS Tax Saver Fund has a more concentrated exposure to the banking sector, which could offer higher returns during periods of economic growth but also pose greater risk if the sector faces challenges.
Whereas, the Nippon India ELSS Tax Saver Fund's more diversified sector allocation suggests it might be better positioned to navigate different economic cycles by spreading its risk across multiple high-performing sectors. The DSP ELSS Tax Saver Fund's largest holding is HDFC Bank Ltd., which accounts for 8.19% of its assets. This is followed by ICICI Bank Ltd. at 6.91% and Axis Bank Ltd. at 3.66%. Other notable holdings include State Bank of India (3.62%), Infosys Ltd. (3.09%), and Samvardhana Motherson International Ltd. (2.73%). The fund's top holdings suggest a strong focus on the financial sector, with significant investments in major banks and financial institutions.
On the other hand, the Nippon India ELSS Tax Saver Fund has its largest holding in ICICI Bank Ltd. at 7.39%, followed by HDFC Bank Ltd. at 6.24%. Infosys Ltd. (4.04%) and Axis Bank Ltd. (3.86%) are also among the top holdings. The fund additionally includes NTPC Ltd. (3.71%), Reliance Industries Ltd. (3.15%), and Larsen & Toubro Ltd. (3.07%), indicating a slightly more diversified approach with investments in energy, telecommunications, and industrial sectors alongside its financial holdings.
The top three holdings of DSP ELSS Tax Saver Fund are all major banks, indicating significant exposure to the financial sector, which is often considered stable and capable of providing consistent returns. This sectoral allocation suggests that fund managers are banking on the resilience and growth potential of India's financial institutions.
In contrast, the presence of major companies from the IT sector (Infosys Ltd.), energy sector (NTPC Ltd.), and industrial sector (Larsen & Toubro Ltd.) indicates that the Nippon India ELSS Tax Saver Fund is spread across various high-growth and stable sectors, potentially offering a balanced risk-return profile.
Both funds appear to have a significant allocation towards the financial sector, which is common for many ELSS funds. This could be a good choice for long-term wealth creation but also carries inherent risks associated with the banking industry.
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Expense Ratio of the Schemes
When comparing ELSS funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here's a quick breakdown of DSP ELSS Tax Saver Fund vs. Nippon India ELSS Tax Saver Fund:
Scheme Name |
Direct Plan Expense Ratio |
Regular Plan Expense Ratio |
DSP ELSS Tax Saver Fund |
0.71% |
1.63% |
Nippon India ELSS Tax Saver Fund |
1.02% |
1.69% |
Data as of June 30, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Nippon India ELSS Tax Saver Fund has a marginally higher expense ratio than DSP ELSS Tax Saver Fund in both Regular and Direct plans. However, both funds are considered to have moderate expense ratios relative to the ELSS category peers.
While the difference between the two funds' expense ratios is minimal under the regular plan, even a small percentage point difference can accumulate over time and impact your returns. However, under the Direct plan, the DSP ELSS Tax Saver Fund offers a lower expense ratio and attracts investors as it is a cost-effective option.
Remember, a lower expense ratio translates to potentially higher returns over time, but a lower Expense Ratio should not be the only factor to be considered while investing in ELSS.
[Read: How to Select the Best ELSS for Tax-saving in 2024]
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Suitability of Investors to the Schemes:
DSP ELSS Tax Saver Fund is suitable for investors who are willing to take on higher risk for the possibility of higher returns. The fund's emphasis on quality stocks with sound fundamentals and reasonable valuations makes it an attractive option for those looking for a balanced approach between growth and risk management. With a three-year lock-in period, investors should have a long-term investment horizon and be comfortable with market volatility in the short term.
Nippon India ELSS Tax Saver Fund is suitable for investors who are willing to stay invested for the mandatory lock-in period of three years and have a moderate to high-risk tolerance. This fund might focus on a mix of growth and value investment strategies, selecting stocks based on both their growth potential and current undervaluation. This dual approach can appeal to investors who are looking for a blend of growth and stability in their investment portfolio.
To summarise...
Both DSP ELSS Tax Saver Fund and Nippon India ELSS Tax Saver Fund are strong contenders in the ELSS category, offering tax benefits and potential long-term growth. While DSP ELSS has demonstrated consistent performance and a robust investment approach, Nippon India ELSS has shown promise with its focus on specific sectors.
Bear in mind that both funds remain subject to market risks. Ultimately, a thorough evaluation of your risk appetite, investment horizon, and portfolio needs will guide you towards the ELSS that best aligns with your financial goals. Remember, diversification across the best ELSS mutual funds can further manage risk and optimise your tax-saving strategy.
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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.