How to profit from bank recapitalisation move: Top 5 mutual funds to invest now

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Published: October 27, 2017 11:28:21 AM

While seasoned investors can research and select quality banking stocks, for novice and amateur investors, banking sector schemes of mutual funds are both lucrative and an easy option.

mutual funds, banking funds, Top 5 banking sector funds, ICICI Prudential Banking and Financial Services Fund, Aditya Birla Sun Life Banking and Financial Services Fund, Reliance Banking Fund, UTI Banking Sector FundBanks, especially PSU ones, represent a good buying opportunity for investors seeking sectors with a favourable risk-reward paradigm.

The move to recapitalise public sector banks is certainly a very bold and favourable one for both the economy and the stock markets. It brings PSU banks back in business and the resultant liquidity would certainly help revive the animal spirits in the economy. From stock market perspective, PSU banks have been underperforming the broader markets. “The recapitalisation move is certainly going to put zing back into this segment of the market. Banks, especially PSU ones, represent a good buying opportunity for investors seeking sectors with a favourable risk-reward paradigm. While seasoned investors can research and select quality banking names, for novice and amateur investors, banking sector schemes of mutual funds are both lucrative and an easy option,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.

Here are 5 banking sector funds you can place your bets on:

1. ICICI Prudential Banking and Financial Services Fund: This is a nine year-old scheme having assets under management (AUM) of Rs 2.5 thousand crore. “Past performance has been splendid with one, three and five-year annualised returns at 28, 23 and 24 per cent, respectively. This scheme managed by Vinay Sharma enjoys a 5 star rating with Value Research and is our top recommended scheme,” says Kapur.

2. Aditya Birla Sun Life Banking and Financial Services Fund: This scheme, launched in December 2013, also boasts of a 5 star rating from Value Research and impressive annualised returns of 22 and 24 per cent over the last one and three years, respectively. Managed by D Mohanty and Dhawal Gala, this scheme has an AUM of Rs 1.4 thousand crore.

3. Reliance Banking Fund: This is one of the oldest and biggest banking sector schemes. Launched in May 2003, it has an AUM of nearly three thousand crore. Currently managed by Sanjay Parekh, the returns over the last one, three and five years are 27, 18 and 19 per cent, respectively.

4. UTI Banking Sector Fund: Managed by Anil Kumar Premchandani, this scheme is also more than 13-year old. It has returned 24, 17 and 16 per cent over the last one, three and five years, respectively.

5. Sundaram Financial Services Opportunities Fund: Launched in June 2008, this scheme has also been a very consistent performer. Last one, three and five-year returns are 19, 15 and 15 per cent, respectively.

All the above schemes are open-ended ones with no lock-in period. Hence, “investors can freely buy and sell units at their convenience. All past returns are annualised. Though impressive past returns are one of the basis of selecting these schemes, there is no guarantee on any mutual fund scheme. Investors should always take the advise of their financial advisors before investing,” advises Kapur.

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