Last week, I recommended to invest in Infrastructure mutual funds in India. This week, I am coming up with another set of sector based mutual funds which is banking sector mutual funds. There are several reasons why you should invest in banking sector mutual funds now to grow your money faster compared to equity funds. In this article, I would provide some insight about how the banking sector is expected to grow in future, risks involved and 3 promising banking and financial services sector mutual funds which you should invest in India now in 2014.
What are banking sector mutual funds?
If you are already familiar about this, skip this section. Mutual fund schemes that invests purely in banking stocks and financial services stocks are termed as banking sector mutual funds. They invest in a variety of stocks like SBI, ICICI Bank, HDFC, HDFC Bank, etc. which are in banking and financial services sector.
Also Read: How Infrastructure funds would help you to grow your money now?
Why banking sector is expected to grow in coming years?
There are several positive things happening in the last 6 months, which can boost the banking and financial services sector in the coming years.
Reason # 1: New Government focus on Infrastructure growth:
Like I indicated in my last week's article, new government is expected to put major focus on Infrastructure growth. While construction and Infra companies are going to be the direct beneficiaries of this, indirectly banking and financial services sector would get benefited with this move. The funds required for such Infra development would pass thru the banks/financial services sector. This would benefit the banking sector in next 3 to 5 years time.
Reason # 2: Banks performance improved:
Large banks have been performing well in terms of financials. Non-Performing Assets are under control. Under the tight controls from the RBI, the banking sector is going to perform well in the coming years.
Reason # 3: McKinsey expects good growth in next 6 years:
McKinsey, a global management consulting firm has released a report few months back about the banking sector. The report titled “Reimagining Banking in India”. This report indicates that by 2020, Indian Banking Sector will be shaped by a strong interplay between the external environment and actions by policy makers and banks. They have outlined three potential scenarios that might emerge as a result, and have qualitatively and quantitatively described the differences in inputs and outcomes. This report provides a positive outlook on banking sector in coming years.
Reason # 4: FDI in the banking sector could increase:
There are several requests to Govt. In India to increase FDI in the banking sector. This would help more inflow of funds to banks and such funds can be used for bank’s business growth.
Reason # 5: Experts say that banking sector may create 20Lakh new jobs:
There are several experts who are indicating that the banking sector can create 20L new jobs in next 5-10 years and 2014 would be starting point for that (Source: Thehindubusinessline). Unless there is business demand, such high employment sources may not be possible. This would indicate that the banking sector would continue to flourish for next few years.
Reason # 6: New Banking Licenses to boost banking sector:
RBI has issued new banking licenses recently, . These new banks are expected to tap new emerging markets and would do innovatively to enter the market. This raises hopes on the banking sector.
What are the risks involved in banking sector funds?
High Risk: Sector funds are always high risk investments. In case sector is in a downturn, you could see huge falls in your capital investment. You might be seeing such downturn in FMCG funds now.
Tighter controls of RBI: While it is good to have tight controls from RBI, some of the measures from RBI would not help the banks to grow. We have seen several instances in the past about RBI takes such measures time to time.
NPAs can increase in the future: Though Non Performing Assets (NPA’s) are under control now, any increase in defaulter of loans in the future can reduce the profits of the banks and financial services companies. We could see this clearly in 2007 Global Financial Crisis where defaulters increased drastically in US and several banks and financial services companies collapsed.
Also Read: Best Monthly Income Plan (MIP) Mutual funds to invest
3 Promising Banking Sector Mutual Funds to Invest now
Now, I would come to a final point about choosing best banking mutual funds in India. Based on past 5 years performance, Valueresearchonline rating, AUM, we have chosen 3 promising banking sector mutual funds which you can invest in India now. These banking mutual funds are expected to double your money in next 3 to 4 years or expected to provide 15%+ annualized returns in next 5 years.
Conclusion: Banking sector outlook looks positive. There are several positive indicators to prove this. With the new government formation, some of these indicators are going to happen. I am positive about Banking Sector Mutual funds and planning to invest in such funds through SIP and expecting good returns in next 3 to 5 years time frame.
Happy investing in Banking Sector Mutual funds!!!
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Suresh
Invest in Banking Sector Mutual Funds now
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sir ,
I already invested in
1- ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND- GRWTH SINCE – 6 YEARS 1000 MONTHLY SIP.
2- lumsum amount in same icici balanced advantage fund- grwth
3- BSL PURE VALUE FUND- GROWTH REGUALR PLAN
4- BIRLA SUN LIFE SHORT TERM OPPORTUNITIES FUND- GRWTH REGULAR PLAN- SINCE ONE YEARS
5- LBCFG- L & T BUSINESS CYCLES FUND GRWTH- SINCE 2.30 YEAR
6- SUNDRAM S.M.I.L.E FUND REGULAR GRWTH- 3 YEARS SINCE
IS I SELECT A GOOD PLAN PLZ . ADVICE
sir, I want to start mutual fund on banking sector, but I'm little concious about that it play good in future. and which cap (large, mid, multi) ect. should we go to. and which bank is best to go.
sir plz advise….. thanks
Hi,
Need your opinion on investing in the following funds for long term , on monthly 20,000.
Franklin (i) smaller cos
UTI Mid cap fund
Reliance Small Cap Fund (G)
HDFC Mid Cap Opportunities fund
ICICI Pru Value Discovery Fund
Canara Robeco Emerging Equities (G)
SBI Blue Chip Fund (G)
HDFC Top 200 Fund (G)
Birla Sun Life Top 100 Fund (G)
UTI Equity Fund (G)
BNP Paribas Equity Fund (G)
ICICI Prudential Balanced Fund (G)
HDFC Prudence Fund (G)
Thanks in advance.
Good funds
SIR, MANY THANKS FOR YOUR ADVICE. BUT WHICH ONE IS BETTER INVESTMENT- BANKING FUNDS OR MULTI CAP FUNDS? DON’T YOU THINK THAT INVESTMENT IN ONLY BANKING SECTOR INVOLVES A LITTLE BIT OF RISK? SINCE NO ONE CAN PREDICT WHAT WOULD BE HAPPENED IN FUTURE.
I agree with you. You should go for multip cap funds
sir, many thanks for your reply. i made a sip in axis eq.(g) DP in march 2015 for 4 years. should i continue?
Hi Suresh sir.
I am started investing from last month in the following MF’s for 10-15 yrs through SIP on monthly basis.
1. Axis long term equity fund growth—monthly 1000
2. Relaince small cap fund growth—-1000
3. Sundaram select midcap fund growth-2000.
And also planning to start investing monthly 1000 in HDFC Top 200 and lumpsum 50000 in Sundaram New Seventh Series.
Please review and suggest is this best portfolio or not and shall I continue with the same or not.
Good funds Ramesh
Thank you sir,
Hi Suresh,
Thanks once again for the wonderful article. My query is: Do the sector based mutual funds taxed in the same way as the equity mutual funds?
Yes Akshay
Hi Suresh,
Till date I don’t have any idea of mutual funds. I am 29 married and have a kid of one year.
Till date I haven’t thought of investing in mutual funds. But I have LIC Jeevan anand policy of 8 lakhs.
From the past four years I have been investing in this policy and it is for 21 years.
I have kotak money back policy which is also 21 years and I have been investing this one for the past 3 years(15000 Per year).
After new budget has released I started searching for other investment options.
I found your blog very helpful in understanding of mutual funds.
I know that I won’t get complete idea till I start investing in them. But I don’t want to mess up my money in investing bad funds.
So I want your suggestion in planning further.
Is it ok to continue with the current Policies?
The current policies is occupying 5000 per month
and EPF of 2100 is getting deducted every month.
And from next April onwards i am Planing to invest 10000 per month(Apart from EPFO).
Suggest me some suitable options to invest in best mutual funds.
In the mean while I will gain some knowledge through your blog.
Thanks.
Hi Kranthi, Consider taking term insurance. Since you have only one LIC jeevan anand policy, you can stay and do not surrender. However don’t take any more ULIP or money back policies. Invest in other investment options like FD or mutual funds too
Hi Suresh,
Thanks for the reply.
will it be better if i can invest the remaining amount in MF’s other than Lic or shall I divide the basket further for FD’s.
Hi Suresh,
Thinking of starting investing lumpsum in MFs for higher returns… Short and long term. Not sure if this is a right time to invest as Markets are trending upwards. or bank FD’s are a better option with a fixed 9% interest… thinking of below funds for MF’s:
Birla frontline
HDFC Midcap
SBI magnum multiplier Scheme 93
IPRU discovery
Uti opportunities
Please suggest
Bhakti, Invest in MF’s thru SIP and don’t think wether market is good or not. Funds selected by you are good
Hi
Need yr opinion on investing in the following funds all monthly sip for long term
Icici tech fund
Sbi fmcg fund
Sbi pharma fund
Icici banking and financial services fund
Uti transport and logistics fund
Reliance tax saver
Icici focussed blue chip
Thanks
Good funds. Stay away from FMCG as of now
Hello Sir,
Please suggest me some good diversified mutual funds for investment through SIP. I’m looking for 12 to 15 years time horizon & I can take risk.
Invest in Birla SL MNC fund, Reliance equity opp fund, Mirae India opps fund etc.
You are simply fantastic with your suggestions.I am holding below 5 SIPs, whats your view on this . Do you want me to exit from any of these and buy other or hold all ?
SUNDARAM SELECT MID CAP REGULAR PLAN GROWTH
BFGP-RELIANCE BANKING FUND – GROWTH PLAN GROWTH OPTION
HDFC Prudence Fune-Debt
EFGP-Axis Equity Fund – Growth
92-Birla Sun Life Frontline Equity Fund -Growth-Regular Plan
You have good funds in your portfolio Shaily. Stay invested.
Hi Sir,
I am also interested to invest in mutual fund, could you please help me on this as I am not getting any help from other.
1. which is the best mutual fund investment area?
2. How to check which is best one ?
Regards,
Arghodip
Arghodip, Since you are new to investment, my suggestion is to invest in balanced mutual funds to start with. 1) Invest in ICICI Balanced fund and HDFC Balanced fund. Keep some amount into recurring deposits also. 2) Once you are familar on how mutual funds operate, you can invest in large cap funds and diversified mutual funds. 3) If you can take some risk, you can invest in top 5 mid cap and small cap funds which I have recommended. But note that you should hold them for 8 to 10 years to get good returns. You can keep tracking every month on how your funds are progressing.
Dear Sir,
Thank you so much for your reply, appreciate your help.
Rgds,
Arghodip
Hey Suresh,
Kudos ! Good to see your articles in Moneycontrol !
http://www.moneycontrol.com/master_your_money/stocks_news_consumption.php?autono=1105526
Thank you Shiv
Hello sir,
Thank you for posting such an informative post……
Hi Suresh,
Very good article by you, i saw this website today for the first time. Several articles on various aspects are very impressive.
Ok let me come to Business…My doubt is do we need to consider 'Value Research Rating' before investing.
As you mentioned in the top 3 banking and financial investments UTI has 3 Start rating, so asking. In which case we can consider and which cases not to consider these rating.
Thanks once again for your very good article 🙂
Naresh, When you buy any product, you may not just see one or two good qualities. You may want to enjoy all the benefits. In same way, a fund may be good, but Crisil rating gives how its fundamentals are. Similarly Value research gives rating on several parameters. These would change every quarter. Hence these can be considered as one of the main parameter and not only parameter.
Hello Sir
Should we use brokers for investing or do it direct wats the difference to do through broker or direct
Hi Satpal, Pls see this article where I have provided differences. https://myinvestmentideas.com/2013/05/mutual-fund-direct-plans-vs-regular-plans-which-is-the-better-option/
Thanks for the research and the article.
Hai Suresh sir, i am 23years old working in a public sector bank.. 10% of my salary goes to NPS. i can save 3000rs per month.. can u give me any idea about in which mutual funds i need to invest so i could get hig returns..
Dheeraj, You have not indicated how long you want to invest. I am assuming for long term of 8 to 10 years.Invest in largecap or diversified funds like ICICI Pru focussed blue chip fund,BNPP Equity fund, UTI Opps fund and Quantum long term equity fund. You can pick any of these funds.
Hello Suresh Sir,
Very informative article. I’m looking for investing in mutual fund for long term (10 to 12 years) & I’m planning to invest in MIRAE ASSET INDIA OPPORTUNITIES FUND through SIP. Is it right fund to invest? Please suggest me some good equity mutual funds to invest? Thanks.
Good diversified fund Vikas. Valueresearch rated this as 5 star. You can invest.
Hi Suresh,
Thnaks for suggesting the banking mutual fund.I was thinking for a while to start investing in PSU banks mutual fund .Please let me know your suggestion which one is better.If i can invest in PSU mutual fund , please suggest a good funds to start with SIP.
Saravana, The idea may be good, but I would analyse in coming week about it. Thanks for giving me this idea. By the way, how is our blog. What changes do you suggest to improve further. Can you please share some good articles (in your opinion) on your FB to your friends.
I am planning to invest lumpsum amount in infrastructure MFs. You are also recommending Banking sector. I have 2 questions,
1. Which will have better performance?
2. Should I invest now or wait for 6 months to 1 year to view the result?
Hi Mohit, Don’t invest lump sum. I have personnaly started investing in both. Yes infra funds would also invest part of their amount in banking sector. Take SIP route so that you need not regret after 6 months of 1 year.
Thanks for your advise. At many places, you had mentioned in your articles to invest in SIP. I had never invested thru SIP but thru banks & agents. Till the time, I had invested in Pharma & FMCG, they had given me good returns in last few years but now they are dead. I will try SIP in few days.
Truly speaking, your blog had changed me; now, I am the most knowledgable person among my colleagues & friends. Your blog is secret for my knowledge & none knows about it. It has been around 1 year & I always read all the articles & comments on it; really gave me an insight to this investment world. I want to tell you one more thing, my little nephew installed an add-on to chrome browser, which had enabled right-click on your blog. Please check this security hole.
Thank you Mohit for your kind words. Regd security issue, I think right click is enabled, however I have made it like we cannot copy the content. In case you see any issue, please let me now. This would be biggest gift which you can give to me.
Sorry for the late reply!
In 3-4 days, I will send you an E-mail regarding copying contents from your website.
Thanks Mohit, if you can send the details to suresh@myinvestmentideas.com it would be really helpful. I got your message and I edited this comment as it is little sensitive
dear suresh, already our diversified mutual funds have good exposure in banking and financial sector, is it worth to take separate fund for banking
Sudhakar, Diversified funds invests part of their amount in banking. If you really want to enjoy the benefits of Infra development, then investing in infra or banking funds would be good.
thanks suresh, can we go for pine bridge economic reforms and infra fund
AUM is < 100 Crores. You should stay away from such funds. Pls refer our Infra funds article which gives you idea about some of the best funds.
Thanks Suresh for giving the details about Banking sector MFs. As per your suggestions, I am also investing in sector MFs (Birla Sunlife Infrastructure fund and ICICI Pru Bank & Fin) for first time thru SIP route.
Thanks
Ravi N
Hi Suresh
I am inventing 3 thousand rupees every month in the below mutual funds. I am requesting you review and suggest to continue or shift to other funds.
Hdfc Prudence Fund – G
Hdfc Mid Cap Opportunities Fund – G
Hdfc Top 200 Fund – G
Birla India Gennext – G
Birla Sun Life Frontline Equity Fund – G
UTI Opportunities Fund – G
UTI – MNC Fund – G
Franklin India Bluechip Fund – G
Franklin India Smaller Companies Fund – G
ICICI Prudential Focused Bluechip Equity Fund – Regular Plan – G
Hi Rajesh, Good portfolio of funds. Keep investing.
Hi Suresh,
Your articles are so interesting wanted to email friends but the email option doesnt quite go through says "check your email address" i did and it was correct. Not sure if it is only my email 🙂
Hi Daughn, Not sure what could be the issue. I tried and it is every here. Let me check with my friends. You can click on FB like button so that these can be shared on your FB