The Banking and Financial Services sector in India has been a consistent structural growth story, evident in its outperformance over the broader Nifty 50 Index across all 10-year periods. The sector's returns have showcased more consistency compared to the broader index. However, a recent underperformance since September 2019 opens up intriguing possibilities for investors, especially considering the reasonable valuations, robust balance sheets, and the potential for a reversal in the sector's fortunes.
Investment Objective:
The DSP Banking & Financial Services Fund is strategically designed with a primary investment objective - to seek long-term capital appreciation. This objective aligns with the fund's vision to harness the growth potential in the banking and financial services sector over an extended period.
Investment Strategy:
To achieve its objectives, the fund follows a well-defined investment strategy. DSP Banking & Financial Services Fund employs a stock-specific approach, emphasizing business fundamentals over market outlook. This approach aims to identify and invest in companies within the sector with strong fundamentals, growth potential, and a promising outlook, regardless of short-term market fluctuations.
Key Insights:
1. Structural Growth Story: The Banking and Financial Services sector in India has historically outperformed the Nifty 50 Index on all 10-year periods. Its returns have exhibited greater consistency over time, underlining its status as a structural growth story in the country.
2. Recent Underperformance and Reversal Potential: Despite its historical strength, the sector has been underperforming the Nifty 50 Index since September 2019. This, coupled with reasonable valuations, strong balance sheets, and the potential for a reversal in underperformance, presents an intriguing opportunity for investors looking to capitalize on a potential upswing.
3. DSP Banking & Financial Services Fund Launch: DSP Mutual Fund has recognized this long-term structural opportunity in the banking and financial services space and has announced the launch of the DSP Banking & Financial Services Fund (DSP BFSF). This open-ended scheme offers investors a chance to participate in the sector's growth over the long term.
4. Broad Sector Inclusions: The BFSI sector extends beyond traditional banks, encompassing NBFCs, Housing Finance Companies, Life Insurance, Non-Life Insurance, AMC, Exchanges & Depositories. All these segments have exhibited faster growth than the nominal GDP of India in the last 15 years, constituting a profit opportunity of over $4 Trillion.
5. Robust Historical Returns: The Nifty Financial Services TRI has delivered over 12% returns in 90% of times over a 7+ year timeframe, surpassing the performance of Nifty 50 TRI. BFSI forms a significant portion of the profit pool of the Top 500 companies in India, and its last 10-year profit growth outpaced other sectors.
6. Stock-Specific Approach: DSP BFSF follows a stock-specific approach, prioritizing business fundamentals over market outlook. The fund aims to maintain a high active share compared to the benchmark, providing a focused and strategic investment strategy.
7. Flexibility for Global Investments: The fund offers flexibility for global investments, allowing the fund manager to invest in selective fundamentally sound businesses internationally, providing additional diversification opportunities.
Asset Allocation:
Under normal circumstances, the asset allocation of the Scheme will be as follows:
New Fund Offer Details:
The New Fund Offer for DSP BFSF is set to open for subscription on November 20th, 2023, and will close on December 4th, 2023.
CEO's Perspective:
Kalpen Parekh, MD & CEO of DSP Mutual Fund, emphasizes the large profits and growing profit pool in the BFSI sector. He highlights the diverse businesses contributing to this growth, ranging from insurance companies and mutual funds to wealth management firms, tech platforms, payments, and fintech. The launch of the NFO at reasonable valuations aligns with the fund's strategy of raising capital when prices are consolidating, providing an increased margin of safety for investors.
Invest Today and Reap the Rewards:
Seize the opportunity to be part of the potential reversal in the Banking and Financial Services sector's underperformance with the DSP Banking & Financial Services Fund. With its strategic launch, diversified approach, and focus on long-term growth, the fund is well-positioned to deliver attractive returns.
Disclaimer:
This blog post serves informational purposes only and should not be construed as investment advice. Before making any investment decisions, investors are advised to consult with a financial advisor to ensure alignment with their individual financial goals and risk tolerance.
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*Investors should consult their financial advisors if in doubt about whether the product is suitable for them Note: The above information has been sourced from the Scheme Information Document provided by DSP Asset Management. Read the entire document before investing, Disclaimer: Jaiprakash (ARN/Distributor - 70524; brand name Vasundhra Investment) is the distributor of the mutual fund. Please consult your investment advisor before investing
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.