Equity Long-short Mutual Funds

Investment in the stock market is a lucrative venture, but due to the fluctuating nature of the markets, many investors find themselves in fear. Equity Long Short Mutual Funds provide a platform where investors can be part of the equity market activities without worrying about market fluctuations. This is achieved through the unique mechanism that generates returns during rising and falling market trends.

What are Equity Long Short Funds?

Equity Long-Short Funds refer to an investment vehicle which combines both long and short positions to take benefit of market movements. Equity Long-Short Funds are classified under Specialized Investment Funds (SIFs).

• Long Position: Investing in stocks expected to increase in value.
• Short Position: Taking positions in stocks expected to decline in value.

By combining these two strategies, fund managers aim to reduce the impact of market fluctuations and generate more stable returns. These funds are actively managed and rely on expert research and market analysis to identify investment opportunities.

Features of Equity Long Short Funds

• Dual Investment Approach: Involves investing in stocks that will perform well, as well as stocks that will underperform.
• Risk Control: The short selling will be beneficial in times when the market is declining.
• Ability to Earn Steady Profits: Strives to exploit opportunities regardless of market conditions.
• Fund Management by Professionals: Managed by experienced investment professionals who actively monitor and adjust portfolio positions.
• Exposure to Various Sectors: Provides exposure to multiple sectors and companies, helping spread investment risk.

How to Invest in Equity Long Short Funds?

You can invest in equity long short funds by following simple process:

Step 1: Choose investment mode. You can invest through:

• AMC websites
• Online investment platforms provided by stockbrokers
• Mutual fund distributors

Step 2: Choose a suitable equity long short fund.

Step 3: Choose between Systematic Investment Plan (SIP) and Lump sum based on your goal and make investment.

Step 4: Make payment through UPI, netbanking or other available methods.

Why to Invest in Equity Long Short Funds?

• Effective Risk Management: Combination of long and short positions will enable better management of the effects of market drops.
• Opportunities in Different Market Situation: Strategy is geared toward providing opportunity regardless of whether the stock prices go up or down.
• Diversification Advantage: It introduces a new form of investing into an existing investment portfolio.
• Professional Managers: Decisions are made by professional fund managers based on comprehensive market analysis.

Taxation Rules for Equity Long Short Funds

This fund is structured as a Category III AIF (Determinate Trust). All taxes are handled and paid directly at the fund level, meaning you receive completely post-tax returns and do not have to report individual trades on your personal tax return.

Tax Breakdown by Investment Strategy

Long Portfolio (Delivery Shares)

• Held > 12 Months (LTCG): 12.5% (on gains exceeding ₹1.25 Lakh)
• Held ≤ 12 Months (STCG): 20%

Short Portfolio & Derivatives (F&O) Business Income: Taxed at the Maximum Marginal Rate (MMR) of up to ~39% to 42.74% (inclusive of applicable surcharges and cess).