Alliance Capital, Tata Mutual Fund, Birla Mutual Fund, BoB Mutual Fund, SBI Mutual Fund, Canbank Mutual Fund, DSP Merrill Lynch, IDBI Mutual Fund, Prudential ICICI, Sun F&C, GIC Mutual Fund and LIC Mutual Fund have decided not to launch any ELSS this year.

When contacted by The Financial Express, almost all funds replied in the negative citing bad market conditions as the main reason. However, Kothari Pioneer Mutual Fund is one fund which is launching an ELSS while the inclination of UTI, the biggest player in the market, could not be known.``Collections in ELSS have drastically dropped over the years with mobilisations last year at an abysmally low level.

The equity markets are still weak and not heading in any particular direction. With schemes open forthree months after launch, the efforts of the funds to market the product and increase awareness is not useful if the fund collects around Rs 1-2 crore,'' said Ajay Kaul, president and country manager, Alliance Capital.

``Investors have lost money in these schemes and it is likely that investors would now turn to other safer investment avenues like public provident fund. With the way in which equity markets are behaving, no one seems willing to lock-in money for three years,'' said the managing director of Tata Asset Management Company, KN Atmaramani.

``With the equity markets declining by around 25 per cent per annum for the last three years, there is no appetite for equity products this season. In the year 1991 when the ELSS was launched, the rate of income tax was very high compared to now and people first look at safety of capital compared to returns while opting for tax saving instruments,'' said the chief executive officer of GIC Mutual Fund, AR Prabhu.

The chief investment officer of DSP MerrillLynch Mutual Fund, S Naganath said that with the mobilisations in ELSS sinking, it does not make sense to launch ELSS.

``If the ELSS schemes can be restructured in any way, they might be able to attract some amount of money. For example, as of now around 80 per cent of the corpus is to be invested in equity products which does not give any leeway to a fund manager. So, if flexibility is given to the fund managers, he could change the structure of the scheme as per the market condition, like they could opt for more investments in debt than equity in periods of bad markets, which would lead to better returns. This would also improve the performance of a number of current ELSS schemes,'' said the managing director of SBI mutual fund, Naimatullah.

Another fund manager says that NAVs of these schemes are languishing below par, investors would definitely find debt instruments for tax-saving a safer option because the principal amount is saved.

``Investor interest in ELSS schemes is at its nadir with themshifting their preference to infrastructure bonds offered by financial institutions like IDBI and ICICI. These bonds differ from ELSS as they offer rate of returns of 12.5-13 per cent apart from income tax benefit under section 88 with a safety of capital,'' he said.