HSBC Mutual Fund Merger: What Does the Shift from ELSS to Flexi Cap Means for You?

HSBC Mutual Fund has announced the merger of HSBC Tax Saver Equity Fund into HSBC Flexi Cap Fund, effective 23 January 2026. This move marks a shift for investors from a tax-saving ELSS scheme to a more flexible equity fund, with important implications for portfolio strategy, liquidity, and taxation.

The merger has received regulatory approval, with SEBI issuing its no-objection on 1 December 2025.

Understanding the 2 Schemes

HSBC Tax Saver Equity Fund is an Equity-Linked Savings Scheme (ELSS) that offered tax benefits under the old tax regime and came with a mandatory 3-year lock-in. In contrast, HSBC Flexi Cap Fund is an open-ended equity scheme that invests dynamically across large-cap, mid-cap, and small-cap stocks, without any lock-in period.

After the merger, investors will move from a tax-saving product to a fully flexible equity fund focused on long-term capital growth.

Why is HSBC Mutual Fund Merging the 2 Schemes?

The tax saver fund was launched in 2007. However, after HSBC Mutual Fund acquired L&T Investment Management in 2022, subscriptions to this ELSS scheme were stopped as regulations allow only one open-ended ELSS per fund house.

By 25 November 2025, all investors in the HSBC Tax Saver Equity Fund had completed their 3-year lock-in. Since both the tax saver fund and the flexi cap fund follow a flexi-cap approach with bottom-up stock selection, HSBC Mutual Fund decided to merge the two schemes to streamline offerings and improve operational efficiency.

What Happens to Existing Investors?

On the effective date of the merger, investors in the tax saver fund will be allotted units of the HSBC Flexi Cap Fund at the applicable NAV. The total value of investments will remain unchanged before and after the merger.

Investors holding IDCW options will be shifted to the corresponding IDCW option in the flexi cap fund. No new scheme is being created, and the provisions of the surviving scheme will remain unchanged.

Exit Option Before the Merger

Investors who do not wish to continue can exit the scheme between 24 December 2025 and 22 January 2026. During this window, no exit load will be charged.

This gives investors a clear choice to either stay invested or redeem without cost.

Tax Implications You Should Know

If investors stay invested, the merger will not trigger capital gains tax. The holding period and cost of acquisition from the tax saver fund will carry forward to the flexi cap fund.

However, if investors choose to redeem or switch out during the exit window, capital gains tax may apply based on the holding period.

Read more: SIP Calculator: How a ₹10,000 SIP Became Nearly ₹60 Lakh in 12 Years in this Fund?

Conclusion

The HSBC Mutual Fund merger simplifies its product lineup while offering investors greater flexibility. For long-term investors comfortable with equity exposure, the shift from ELSS to a flexi cap fund removes lock-in restrictions without disrupting investment value. However, those seeking tax-saving benefits under ELSS should reassess their portfolio and future tax planning strategy.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.