The Hindu Business Line : Benchmark MF plans scheme based on CNX Bank Index

The proposal, noted Mr Sanjiv Shah, Executive Director of Benchmark MF, takes into consideration the belief that influential sections in the stock market are increasingly looking at opportunities in the banking sector, which has lately emerged as an important segment of the domestic economy.

Tracking error - the standard deviation of the difference between daily returns of the index and the scheme's NAV - will be a key issue for investors. Factors such as fees and expenses, corporate actions or regulatory policies may affect the fund's ability to secure close correlation with the underlying index. And the performance of the CNX Bank Index will have a direct bearing on the scheme.

The Indian banking sector, it is pointed out, has already undergone considerable changes. Recent developments include the introduction of the Securitisation Act, formation of asset reconstruction outfits, NPA recoveries and rise in income from treasury operations. These have come together to help banks to record better profitability.

The CNX Bank Index, according to India Index Service and Product Ltd (the joint venture between NSE and rating agency Crisil which has developed it), comprises the sector's "most liquid and large capitalised" stocks. An index with January 1, 2000 as the base date, it comprises 12 stocks - State Bank of India, ICICI Bank, HDFC Bank, Punjab National Bank, Andhra Bank, Bank of Baroda, Bank of India, Canara Bank, Corporation Bank, Oriental Bank, Syndicate Bank and Union Bank of India.

Benchmark MFcurrently manages three ETFs, two of which are based on the Nifty and Nifty Junior. The third - Liquid BeES - is said to be the first product of its kind in any market. These collectively manage around Rs 105 crore at this juncture, Mr Shah maintained.