Banking and financial services are expected to deliver higher growth than the economy in the long term. India’s banking sector is fairly regulated, and there is little chance of operational irregularities. Investors with a risk appetite and looking for alpha returns can invest in the fund.
OBJECTIVE: The fund essentially identifies alpha stocks among the various themes in the banking sector. In an emerging economy like India, the banking sector plays a very crucial in the growth. The fund aims to select stocks, which have the potential to beat the CNX Bank and offer more than average returns to the investors.
Since its launch in May 2003 the fund has performed reasonably well as against its benchmark CNX Bank . The fund has given 837.8% returns since its launch against 522% for CNX Bank.
Last year the fund had high exposure to public sector banks. As stocks of these banks reached peak level, the fund trimmed its exspoure. The fund increased its exposure to private sector banks. At present, the fund now has a balanced portfolio of large and mid-size public and private sector banks.
It has exposure to two major private sector banks – ICICI and HDFC. What works for the fund is its vast universe of banks and non-banking financial corporations( NBFCs).
Almost all banks and some crucial NBFCs such as Bajaj Finance are a part of its portfolio. This offers the fund a distinct edge in terms new themes developing in different segments of the banking sector.
We see a lot of potential re-rating of old private sector banks. India is an under-banked country. In emerging countries, the banking sector grows at almost two times the GDP. So, opportunities are huge in the sector. — Sunil Singhania, Head-equities, Reliance Mutual Fund.
Source: Economic Times