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ELSS is a good option for an investor to take exposure to equities as it comes with an added benefit of tax savings on investments up to a specified limit. Although it comes with a lock-in of three years, this should not be seen as an irritant as equity is a long-term asset class and delivers superior return over cycles. To benefit from the compounding effect, one has be patient and remain invested during market ups and downs. Three-year lock in encourages the investor to have a minimum three-year view while investing in ELSS funds which is in the interests of the investors considering the characteristics of the asset class I just explained.

Indian equity markets have delive-red very strong returns in the last 12 months with the benchmark Sensex delivering about 26% returns and BSE Midcap Index about 37% returns. Even though the medium- to long-term outlook for markets continues to remain positive, it would be prudent for investors to moderate their return expectations and not extrapolate last one year's returns. Over a longer period of time, return expectation from equity as an asset class should be in line with the nominal GDP growth.