To plan your investments wisely, it is essential to look at the latest market trends and developments. If you observe growth in areas like banking and financial services in India, investment in sectoral mutual funds that focus on industries like banks, NBFCs, insurance companies and other financial institutions can be strategic investment decisions. In this article we would talk about Best Banking Sector Mutual Funds to invest in 2024.
How do Banking and Financial Services Funds Work?
Mutual funds focused on the BFSI sector typically allocate their investments across two main industries, the core banking category, and the financial services category. As mandated by SEBI, this type of sectoral fund must invest 80% of its AUM in banking and financial service companies.
Unlike any other sectoral funds, banking sector funds are considered safer as the banking and financial service industry is governed by regulators like SEBI, RBI, IRDAI, PFRDA etc. Hence, the probability of unethical practice and bad corporate administration is less as the industry is under strict administration and governance.
Numerous asset management companies have introduced sectoral mutual funds focusing on banking and financial services to take advantage of opportunities within this thematic category. Recently, Groww Mutual Fund (formerly known as Indiabulls) has launched banking and financial service mutual fund too.
Top Banking and Financial Services Fund
Below are the top banking and financial services funds, their investment objective and fund performance.
#1 – Invesco India Financial Services Fund
It is among the top banking and financial service mutual funds in the county. The minimum investment for SIP is Rs.100 and Rs.1000 for lump sum and has an expense ratio of 1.08% (including GST).
#2 – Aditya Birla Sun Life Banking and Financial Services Fund
Aditya Birla Sun Life Fund was launched on 25 November 2013, and since then it has delivered a annualized return of 18.71%. The fund comes with an exit load of 1% if withdrawn within 30 days of investing.
#3 – ICICI Prudential Banking and Financial Services Fund
It is a banking and financial sector fund from ICICI Prudential AMC, which is one of the biggest and well-known financial service companies in India. Its equity sector allocation includes 86.3% in financial services, 12.4% in insurance and 1.3% in others.
#4 – Sundaram Financial Services Opportunities Fund
Sundaram Financial Services Opportunities Fund launched on 1st January 2013, is one of the most dynamic financial services sector funds in India. It has delivered a return of 14.68% since inception and a five-year return of 19.4%. This fund comes with an expense ratio of 0.79%.
#5 – Nippon India Banking & Financial Services Fund
Currently, the fund has an AUM of Rs.5,192 crores and has delivered a 5-year return of 14.9%. Investors can start a SIP from as low as Rs.100 which comes with an expense ratio of 1.11% and an exit load of 1% of NAV if withdrawn within 30 days of investment.
| Banking Sector Mutual Funds | 5-year Return (%) | Since Inception (%) |
|---|---|---|
| Invesco India Financial Services Fund | 16.9 | 19.10 |
| Aditya Birla Sun Life Banking and Financial Services Fund | 14.9 | 18.81 |
| ICICI Prudential Banking and Financial Services Fund | 12.5. | 18.40 |
| Sundaram Financial Services Opportunities Fund | 19.4 | 18.14 |
| Nippon India Banking & Financial Services Fund | 14.9 | 17.82 |
Reasons to Invest in Banking Sector Mutual Fund 2024
Instead of going with the flow and blindly investing in the best banking and financial services fund, it is important to understand the reasons behind the hype, which are as follows:
Leverage Banking Sector Improvements and Growth
The banking and financial service sector is improving its financial health by reducing NPAs (bad loans) and strengthening its balance sheets. Reducing non-performing assets will prepare the sector to support economic growth in the near future.
Strong Government Reforms
Government reforms are strengthening the banking and financial services systems. Initiatives like Aadhaar, Pradhan Mantri Jan Dhan Yojana, Mobile Trinity and UPI were launched to promote financial inclusion.
Take Part in India’s Fast-growing Economy
The Indian economy has become one of the quickest among major developed and emerging economies. Moreover, the World Bank raised the 2022-23 GDP forecast for India to 6.9% which was 6.5% in October 2022.
Evolution and Growth of Fintech
The financial service sector is expanding through market penetration and digitization. It is expected and already witnessed that the evolution of fintech will enhance financial inclusion and expand the reach of the banking sector in the rural parts of the country.
Conclusion: Hopefully, you have got some clarity on some of the top banking and financial services funds in India. Lately, mutual funds focusing on the banking and financial service sectors have performed exceptionally well. It is mainly because of increasing digital banking outreach, reduced non-performing assets (NPAs), and streamlined M&A of banks and fintech companies. In future, performance can be further improved by optimizing NPA ratios and increasing digital transactions within the sector.
Suresh KP is the Founder of Myinvestmentideas. He is NISM Certified – Investment Adviser and NISM Certified – Research Analyst. He has been analyzing financial markets in the last 20 years.He can be reached at suresh@myinvestmentideas.com
