NFO Alert: DSP Mutual Fund launches DSP Banking & Financial Services Fund; all you need to know

What kind of mutual fund scheme is this?

This is anopen-ended equity scheme investing in the banking and financial services sector. This scheme is suitable for investors seeking

• Long-term capital growth
• Investment in equity and equity-related securities of banking and financial services companies

What is the main objective of investing in this fund?

The main goal of the fund is to generate returns by investing in both domestic and international equity, as well as equity-related securities of companies operating in the banking and financial services sector.

“Companies in the BFSI sector have large profits compared to other sectors. The profit pool is also growing due to the addition of diverse businesses across insurance companies, mutual funds, wealth management firms, tech platforms supporting the industry, payments and fintech. We prefer to raise money in such sectors with long-lasting growth when their prices are falling or consolidating. Lenders also have leverage as raw material and hence go through cycles of volatility. In recent years, stocks in the BFSI space have corrected, thus increasing the margin of safety for an investor. We are happy to launch the NFO when valuations are reasonable,” says Kalpen Parekh, MD & CEO, DSP Mutual Fund.

How may one invest in this scheme?

Investors can invest under the scheme with a minimum investment of ₹100 per plan/option and in multiples of Re 1. There is no upper limit for investment.

Under normal circumstances, the asset allocation of the scheme will be as follows:

Are there similar mutual funds in the market?

To date, many asset management companies (AMCs) have launched such banking and financial services funds, thus, allowing inclined investors to avail of returns corresponding to the total returns of the securities in this particular index. These include:

How will the scheme benchmark its performance?

The performance of the scheme will be benchmarked against Nifty Financial Services TRI. The trustee may change the benchmark for any of the schemes in the future, if a benchmark better suited to the investment objective of that scheme is available at such time and as per the guidelines and directives issued by SEBI from time to time.

The Nifty Financial Services TRI has also delivered over 12 per cent returns in 90 per cent of time over a 7+ year timeframe compared to 52 per cent for Nifty 50 TRI. Banking, Financial Services and Insurance (BFSI) forms 38 per cent of the profit pool of the top 500 companies in India, but is just 26 per cent of the market cap. The last 10-year profit growth for BFSI was 17 per cent compared to 10 per cent among the top 500 companies excluding BFSI. Bank balance sheets have also grown stronger with lower NPAs. This could aid a sustained pick up in credit growth.     

Are there any entry or exit loads to this scheme?

• This scheme involves no “Entry Load”, which means that investors do not have to pay anything to park their earnings in this scheme. 
• The “Exit Load” would also be “Nil”. 

Who will manage this scheme?

Dhaval Gada and Jay Kothari will be looking into the equity aspects of the scheme. 

Does the fund contain any inherent risk?

The scheme involves “Very High Risk” as per the details mentioned in the Scheme Information Document and is best suited to investors willing to understand that their principal will be subject to very high risk only. However, investors should consult their financial advisors if they doubt whether the product is suitable for them.

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Updated: 20 Nov 2023, 04:22 PM IST