SECTORAL SCHEMES

SECTORAL SCHEMES

These are a variant of equity oriented schemes where the risk for the investor is higher than the diversified equity schemes. The funds of such schemes are invested into the shares of a particular sector only or it could be in companies that comply with a particular theme only.

A good example of such schemes are those which invest in the shares of information technology companies or companies from the fast moving consumer goods (FMCG) sector. There is a possibility of a higher return from such schemes because even if the whole market is not doing well a particular sector might be on the growth path. At the same time this has a higher risk because it is possible that nothing happens to a particular sector while the overall market is rising or it could be that just a specific sector is doing badly due to specific reasons. Further with other investment options closed the entire portfolio of the scheme will be subject to a similar kind of risk leading to very little diversification in the portfolio.

Equity linked savings scheme
Equity linked savings schemes are also known as ELSS or tax savings schemes. These are like diversified equity schemes in terms of their portfolio composition but they give investors a tax benefit that other schemes do not. Investment upto Rs 1 lakh into these schemes qualify for a deduction under Section 80C of the Income Tax Act along with several other specified investment options.

Investors who put money into such schemes are looking at earning a higher return on their investments and at the same time save on the tax. Unlike normal equity schemes there is also a three year lock in for such schemes.