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Nilanjan Dey

Banking sector funds top in short-term returns

Kolkata May 22 The sweepstakes are changing again. Banking sector funds are catching up fast with reigning champions, technology funds, riding high on the advances being recorded by bank stocks, large- and mid-cap.

Banking funds have topped the league tables with the highest one- and three-month returns, netting a quick eight per cent-plus for the one-week period ended May 18.

In the process, they have beaten all other sectoral funds - FMCG funds (3.4 per cent for the week), tech funds (1.9 per cent), pharma funds (1.1 per cent) and auto funds (0.2 per cent).

Select bank stocks have been the toast of the market in recent times, a trend that has been reflected in NAVs, according to investment circles, with reference to the surging prices of major stocks like SBI as well as a host of smaller players.

Adding strength to the contention is movement in the Bank Nifty, which has moved up from 5,388.95 on March 1 to 5,950.65 on May 15.

The index is made up of a dozen stocks, including relatively smaller cap outfits such as Corporation Bank, Union Bank, Oriental Bank and Canara Bank.

Banking sector funds have turned in 10.1 per cent and 13.9 per cent respectively for three- and one-month periods, according to Value Research.

All other sectoral plays have provided single-digit figures, with tech and auto funds delivering negative scores for the three-month period ended May 18.

The one-year performance has also been decent, it is felt.

UTI MF's banking fund has produced 42 per cent, followed by Reliance MF's banking fund with about 36 per cent.

A large number of diversified funds currently have marked exposure to banking and related areas of financial services, said fund sources.

Some of the top performers have 12-15 per cent of their net assets allocated to "financial services."

The toppers in this set - ICICI Prudential Services Industries, Birla Sun Life Frontline Equity, ICICI Prudential Infrastructure and Franklin India Prima Plus - are all critically exposed to the sector. Each fund has delivered 32-36 per cent over one year.

ICICI Prudential Services Industries Fund, which has provided 36 per cent over a year, has 12 per cent exposure to financial services.

The latter is, inter alia, made up of stocks such as ICICI Bank, PNB, Andhra Bank and Union Bank.

Franklin India Prima Plus, which has given 32 per cent over a year, has 15 per cent in financial services. Its portfolio includes Kotak Mahindra Bank and ICICI Bank.

MFs said that some funds have lately scaled up their exposure to select stocks in the financial services space.

Stocks such as HDFC, IDFC and even securities broking firm India Infoline are being mentioned in this context in addition to pure banking plays.

UTI MF's banking fund, which has returned 29 per cent since inception in early 2004, is exposed to a number of smaller cap outfits, including Centurion Bank of Punjab, Karur Vysya Bank, YES Bank and Indian Overseas Bank.

The rising interest rate scenario is positive for banks in terms of margins, since advances, which are linked to the PLR, get re-priced faster than the deposits, the fund house had said at the end of the last quarter.

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