Comments
Banking sector funds have put up a strong show over the long run, outperforming large- and multi-cap funds by a notable margin. Over three- and five-year periods, banking sector funds have trumped large-cap-oriented and multi-cap equity funds by 3-6 percentage points. Their returns have been on par with mid- and small-cap funds over a five-year period. In fact, their recent three- and one-year performances have been far superior, given the fall in mid- and small-cap stocks.
There are currently 13 funds in the category, of which nine have a five-year track record. Funds such as ICICI Prudential Banking and Financial Services, Reliance Banking, Invesco India Financial Services, Sahara Banking and Financial Services, Sundaram Financial Services Opportunities, and UTI-Banking and Financial Services have a much longer 10-year track record. The first three funds are among the top performers and have delivered 18-21 per cent annual returns over five- and 10-year periods.
But, in the past one year, these have delivered lower 2-6 per cent returns. SBI Banking and Financial Services — a relatively new fund launched in 2015 — has delivered robust 14 per cent returns over the past year.
Blockbuster years
Banking sector funds’ outperformance over the past five years, vis-à-vis large- or multi-cap funds’ has been because of their spectacular returns in 2012, 2014 and 2017. In 2012, for instance, while banking sector funds delivered a whopping 58 per cent returns, large- and multi-cap funds delivered 30-33 per cent returns. In the 2014 rally, too, banking funds delivered 62 per cent returns as a category, beating large- and multi-cap funds by 9 and 17 percentage points, respectively.
Over the past year, while large-, multi- and mid-cap funds have delivered -1, -3 and -9 per cent, respectively, banking sector funds have managed to deliver 5 per cent returns.
Top performers
ICICI Pru Banking and Financial Services has been a top performer over the long run, beating the category across cycles. Invesco India Financial Services has also been a steady performer. However, over the last one year, SBI Banking & Financial Services has raced past both the funds, beating category returns by a wide margin.
Based on the portfolio information available until March 2019, SBI Banking & Financial Services’ bet on Bajaj Finance, ICICI Bank, SBI and Axis Bank appears to have paid off handsomely. Barring the fund’s holding in Cholamandalam Financial Holdings, there haven’t been too many slips, which has possibly worked in its favour.
For ICICI Pru Banking Fund, its exposure to Karur Vysya Bank, Magma Fincorp, South Indian Bank and GIC has weighed on its performance. These stocks have fallen 21-33 per cent over the past year. For Reliance Banking Fund, its holdings in PNB Housing Finance, Reliance Home Finance, Karur Vysya Bank and Magma Fincorphave impacted its performance. These stocks have fallen 20-33 per cent over the past year. Reliance Home Finance has fallen by a sharp 52 per cent in the last one year. The fund exited its 4 per cent holding in Reliance Capital during the year.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.