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These Banking & Financial Services Funds Have Posted Good Returns Despite Weak Market Cues

Highlights

  • Banking & Financial Services Funds are offering good returns - Shall you invest in them?
  • You can consider investing in funds whose assets are exposed to profit-making banks and financial entities
  • Go online & check the portfolio composition of these funds to see where the money is exposed to

The performance of equity mutual funds has been far from ideal in the last year and a half. These funds have either hit sharp lows or are in the negative zone. But some banking & financial services sector funds have defied all odds and posted good returns for the investors during this period. A few of them have given more than 20% return. Read on to know the funds that have lived up to the expectations of the investors in this dull phase.

Top-performing Banking & Financial Services Sector Funds

Funds1-year Return (Lump Sum)
Baroda Banking and Financial Services Fund22.92%
ICICI Prudential Banking and Financial Services Fund18.90%
SBI Banking & Financial Services Fund24.49%
Aditya Birla SL Banking & Financial Services Fund14.89%
UTI Banking and Financial Services Fund 10.69%
Reliance Banking Fund11.18%

As far as top performers in SIP investments are concerned, there are two funds that you can see in the table below.

Funds1-year Return (SIP)
Baroda Banking and Financial Services Fund12.43%
SBI Banking & Financial Services Fund11.99%

Note – Lump Sum and SIP returns are sourced from Value Research as on October 9, 2019.

What Has Worked for These Funds?

One must thank the asset allocation strategy implemented by the respective fund managers. These managers have concentrated the assets mostly into the stocks of banks and other financial entities that are churning profits. Most of the funds you see here have their assets mostly in the stocks of ICICI Bank, Axis Bank, HDFC Bank, HDFC Limited and State Bank of India (SBI). The profits of these banks are increasing quarter after quarter, if the official data is to be believed. The rise in profits has led to a surge in the value of underlying stocks and which is now reflecting in the gains of these mutual funds.

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Will The Good Run Continue?

It will depend firmly on the asset allocation strategy. The assets should be there in the stocks of only those banks and financial entities which are increasing their bottom lines. Because, if you talk about the health of the banking & financial services sector, it’s far from being desirable. Public sector banks are facing asset quality woes with rising volumes of Non-performing Assets (NPAs). On the other side, non-banking finance companies (NBFCs) are facing liquidity issues due to loan payment defaults from Infrastructure Leasing and Financial Services (IL&FS). The credit squeeze from banks has further complicated matters for these companies.

Disclaimer – “Mutual fund investments are subject to market risks. Please read the scheme document carefully before investing