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

What type of mutual fund scheme is this?

This is an open-ended equity scheme that invests in the banking and financial services sector. This scheme is suitable for investors looking for

• 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 objective of the fund is to generate returns by investing in 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 huge profits compared to other sectors. The profit pool is also growing due to the addition of various businesses across insurance companies, mutual funds, wealth management firms, technology 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 therefore go through cycles of volatility. Over the past few years, stocks in the BFSI space have corrected, 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 can one invest in this scheme?

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

Under normal circumstances, the scheme’s asset allocation 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, allowing biased investors to benefit from returns that correspond 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 future, if a benchmark better suited to the investment objective of that scheme is available from time to time and in accordance with the guidelines and instructions issued by SEBI from time to time .

TRI Nifty Financial Services has also delivered more than 12 percent returns 90 percent of the time over a 7+ year time span compared to 52 percent for Nifty 50 TRI. Banking, Financial Services and Insurance (BFSI) accounts for 38 percent of the profit pool of India’s top 500 companies, but only 26 percent of the market cap. The last 10-year profit growth for BFSI was 17 percent compared to 10 percent among the top 500 companies excluding BFSI. Banks’ balance sheets have also grown stronger with lower NPAs. This could help a continued increase in credit growth.

Are there any in or out loads in this scheme?

• There is no “Entry Load” involved in this scheme, which means investors do not have to pay anything to park their earnings in this scheme.
• The “Retirement Load” would also contain “None”.

Who will manage this scheme?

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

Is there any inherent risk in the fund?

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

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Updated: 20 November 2023, 04:22 PM IST