HDFC Banking and Financial Services Fund: Should you invest?

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HDFC Mutual Fund recently announced the launch of HDFC Banking and Financial Services Fund for retail investors. The NFO opened on June 11 and will close on June 25, 2021. The new fund aims to invest in banking and financial services with a focus across segments, market capitalisation, banking, broking, insurance, and other companies that are into business of providing financial services. The fund philosophy is to invest in companies that are market leaders with gaining market shares, superior execution, and is well placed in terms of technology. The fund will also enter into opportunities in new listings, including pre-IPO participation.

Management Views

As the expectation of robust economic growth in FY22, the management believes that this fund will provide a good time to invest in the banking and financial services space.

“Over last two decades, the banking and financial services sector has grown faster than the GDP. Despite this growth in the past, the penetration of various banking and financial services in the Indian economy is low. This means there is a scope for this sector to continue to grow,” said Anand Laddha, Fund Manager.

Charges

The investment plans under this fund have a direct plan and regular plan option. Entry load is not applicable on this fund. With respect to each fund/switch-in of units, an exit load is 1% applicable on the fund if the units are redeemed or switched out within 1 year from the date of allotment.

Peer Comparison

As per value research data, the Equity – Sectoral Banking category has given an annualised returns of 74.25%, 8.03%, and 12.37% over 1, 3, and 5 years as of 15^th June, 2021. That said, the fund will follow the NIFTY financial services total return index as a benchmark index.

Things to look at

For the investors, it is important to know that this fund comes under ‘Very High’ risk under the fund risk-o-meter parameter. Therefore, investors should consult their advisors before investing to know more about the risk involved in such fund.

“Banking and financial services put together account for one-fourth of India’s total market capitalisation. It offers a well-diversified investment opportunity and hence we are launching this fund,” added Laddha.