How is the performance of RGESS Mutual funds?

How is the performance of RGESS Mutual fundsHow is the performance of RGESS Mutual funds?

This post is based on the topic suggested by Rajanandan on "Suggest-a-topic" option about Performance of RGESS Mutual funds. Last year Govt of India introduced Rajiv Gandhi Equity Saving Scheme (RGESS) to provide tax benefit to new investors in shares. While investing in direct stock markets are risky, Govt of India allowed some mutual funds to introduce Rajiv Gandhi Equity Saving Scheme (RGESS) Mutual funds for such investors. This is to save new investors by reducing their risk. Now 6 months over, how is the performance of RGESS Mutual funds?

About Rajiv Gandhi Equity Saving Scheme

Finance act 2012 introduced RGESS scheme which is special scheme to encourage new investors to invest in stock market and thereby providing tax exemptions under section 80CCG. An individual can invest to a maximum amount of Rs 50,000 and get 50% deduction in his taxable income. This is good initiative for new retail investors in shares.

Also read: Dividend or growth mutual funds – Which is better option?

How is the performance of RGESS Mutual funds?

Several people requested Govt of India that an individual who is investing directly in stock market would face high risk, hence requested for alternatives. During this direction, Govt of India allowed RGESS Mutual funds. Since mutual funds would do their own research and provide better returns, this was a good move. During this process, mutual fund companies have launched 6 RGESS Mutual fund schemes. I have analyzed the performance of RGESS Mutual funds for the last 6 months period and below are the observations:

  • There are 6 RGESS Mutual funds which offered direct and regular options.
  • Returns in the last 6 months are ranging between -3% (minus) to 3% returns. Means if one has invested in some of these funds, his portfolio would have been negative.
  • DSP BR RGESS scheme tops in terms of returns providing 3% returns in last 6 months.
  • LIC Nomula scheme is in second position offering 2% returns. UTI RGESS Scheme has provided 0.8% returns in last 6 months.
  • 3 out of 6 mutual fund schemes (regular and direct) are at negative returns as of now. Birla SL RGESS, IDBI RGESS, HDFC RGESS are under performers which are providing loss as of now. Investors are surprised to see good brand mutual fund companies which floated these schemes have provided negative reuturns on these mutual funds.

How long should we hold RGESS Mutual funds?

6 months Performance may not be indication about the performance of the scheme. Since these RGESS mutual funds have a lock-in period of 3 years, you should wait and watch on the performance for at least 2 years.

Can we do fresh investments in RGESS Mutual funds now?

No. These are close ended mutual funds and you cannot make any fresh investments now. However new NFO’s would be launched during Jan to Mar-2014, hence if you are new investor in shares and want to avail the tax benefit you can wait, review and invest in such NFOs.

Also read: 5 Best Mutual funds which gave solid and consistent returns

Performance of RGESS Mutual funds chart is enclosed below

Performance of RGESS Mutual funds

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How is the performance of RGESS Mutual funds

Suresh KP


  1. Dear Investors,

    I hv been using this kind of instrument for saving since inception and believe me its an awesome tool to get average return around 20 percent per annuam. I personally hv gained this much 2 times. Though one has to remember that the lockin period is ofcourse 3 years.

  2. Hi Suresh,

    Hope you are doing well and i have been a regular fan of your articles 🙂 . Here i came with a Query to you .. This financial year i am planning to invest in RGESS where my some of income crossed to 20% of income tax slab , hence i would like to invest around 30 to 35,000 in this scheme (Demat account process is In progress) . Could you please confirm me what is the better Mutual fund scheme so far as per your observation and which option / Scheme do you prefer to invest ?

    I am eagerly awaiting the response, Please could you help me out.

    Thanks in advance,
    Srinivasa Rao.D

    1. Currently, I could see only one good fund in RGESS i.e. HDFC RGESS Sr. 1-Feb-2013 which has AUM of Rs 150 Crores and generated 40%+ returns in last 1.5 years.

  3. Hi Suresh Sir,
    Thanks for reply. Sir I want your opinion about quantum tax saving fund. Is it good for investment?

    1. Vikas, Since only new investors can invest in RGESS, we cannot compare both the options. But even for new investors, we need to wait and check how such RGESS mutual funds perform so that in future new investors can subscribe for such RGESS funds.

  4. Thanks for your analysis on RGESS. I have one more request- is there any product in market which provides higher coverage like term plan and provides return after end of term (atleast premium paid during the term). I might sound crazy but just want to know.

    1. Hi Rajanandan, There was talk that term insurance plans with maturity benefits would be made available soon. I could not see anything as of now. In case I found, I am glad to write an article on thiat. BTW what do you do and how do you plan your investments. What suggestions do you recommend to improve our blog ?

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