Mirae Asset Banking and Financial Services Fund NFO – Is this the right time to invest in such funds?
Mirae Asset Banking and Financial Services Fund NFO Review
Mirae Asset MF is planning to launch Banking and Financial Services Fund. This NFO would open for subscription from 25th November, 2020. As the name indicates, this fund invests in banking and financial services stocks in India. Bank/Financial institutions NPAs are expected to rise in Q3/Q4 as a moratorium period has helped many business enterprises till Sep-2020. Should you invest in Mirae Asset Banking and Financial Services Fund NFO then? What are the various risk factors associated with such funds?
Mirae Asset Banking and Financial Services Fund (NFO) – Issue details.
This is an open-ended equity mutual fund scheme. Here are the NFO issue details.
|Mirae Asset Banking and Financial Services Fund NFO – Issue Details|
|Scheme reopens for continous purchase/sale||14-Dec-20|
|Minimum investment (Lumpsump)||Rs 5,000|
|Minimum investment (SIP)||Rs 1,000|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||1% if exited within 1 year|
|Max Total expense Ratio (TER)||2.25%|
|Benchmark||NIFTY Financial Services TRI Index|
|Fund Manager||Mr. Harshad Borawake|
What is the investment objective of this MF scheme?
The investment objective of the scheme is to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in banking and financial services sector.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
What is the allocation pattern in this mutual fund?
This fund investment pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Equity and equity related instruments of companies in
the Banking and Financial Services Sector in India
|Other equities and equity related Instruments||0%||20%||High|
|Debt and Money Market instruments||0%||20%||Low to medium|
|Units issued by REITs & InvITs||0%||10%||Medium to High|
Why to invest in Mirae Asset Banking and Financial Services Fund NFO?
Here are a few reasons to invest in such mutual fund schemes.
1) This fund invests in banking and financial services companies’ stocks. This sector is a consistent performer.
2) This fund invests in banking and financial services sector, which is evergreen sector. This sector has outperformed in the last 15-20 years. It is expected to continue to grow in future too.
3) Owning to covid pandemic, many banking and financial services stocks are undervalued now. This provides opportunities for such funds to invest at lower stock prices.
Some key risk factors you should consider before you invest in such funds
One should consider some of these risk factors / negative factors before investing.
1) Due to covid-19 crisis, many small to medium businesses have collapsed. Due to the moratorium, banks were able to manage this till Q2. However post Q3/Q4 results, we might see loan defaults and increase in NPAs.
2) Investing in this Bank and financial services sector is like investing in single sector. If the sector is in down trend, it would reflect in the fund performance too.
3) If the banking sector crisis across the globe that happened in 2008 is repeated again, it can wash away your investment.
4) This fund invests in debt instruments where there are interest rate risks, liquidity risks and default risks.
5) It also invests in REITs and InvITs which are high risk.
6) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.
Past Performance of Banking and Financial Services Funds
Here is the quick snapshot on the performance of the existing funds from this category.
|Fund Name||Annualised Returns|
|1 Year||3 Year||5 Year|
|SBI Banking & Financial Services Fund||0.1%||9.3%||16.5%|
|Invesco India Financial Services Fund||-2.0%||4.8%||13.5%|
|Aditya Birla Sun Life Banking & Financial Services Fund||-8.2%||0.3%||12.0%|
|Taurus Banking & Financial Services Fund||-3.1%||6.8%||11.9%|
|Sundaram Financial Services Opportunities Fund||-2.1%||4.9%||11.5%|
|ICICI Prudential Banking and Financial Services Fund||-12.1%||-1.1%||11.1%|
|Baroda Banking and Financial Services Fund||-6.0%||4.4%||10.3%|
|UTI Banking and Financial Services Fund||-11.3%||-3.1%||7.8%|
|Nippon India Banking Fund||-16.4%||-3.5%||7.2%|
|LIC MF Banking & Financial Services Fund||-5.3%||-4.5%||4.9%|
Mirae Asset Banking and Financial Services Fund NFO – Should you invest?
Mirae Asset Banking and Financial Services Fund invests in banking and financial services sector stocks. This sector is undergoing severe stress in the last 6 to 9 months due to covid-19 crisis. While thousands of small and medium enterprises have collapsed, many are under recovering path now. Banking and financial services sector is evergreen and this the backbone of the Indian economy. Investments done now in this sector can go down for next couple of quarters in case there is a rise in NPAs with the banks. However, in medium term and long term, this sector is promising. One can invest in such funds through SIP to reap the benefits. If you do not want to test with new funds, you can invest in some of the best banking and financial services funds that have proven its performance.
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