Kotak Mahindra Asset Management Company Ltd announced the launch of Kotak Banking & Financial Services Fund, an open-ended equity scheme investing in the Banking and Financial Services sectors. The scheme opens for public subscription on February 6th, 2023 and closes on February 20th, 2023.
Q. What kind of mutual fund scheme is this?
This is an open-ended sectoral or thematic fund that would invest primarily in banking stocks. However, there can be no assurance that the investment objective of the scheme would be achieved.
Q. What is the main objective of investing in this fund?
The investment objective of this actively managed sectoral fund is to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity-related securities of companies engaged in the banking and financial services sector.
Q. Who can invest in this fund?
Banks are a significant part of the banking and financial services segment and are generally seen growing at 1.5 to 2.0 times the rate at which the economy grows. Hence, continued growth momentum in the economy is likely to aid this sector in going ahead.
Shibani Sircar Kurian, Senior EVP, Fund Manager & Head -Equity Research, Kotak Mahindra Mutual Fund said, “We are happy to offer this fund to our customers. In India, the BFSI sector has a long way to go, considering the under penetration as compared to global averages, be it in mutual funds where only 7% of the Indian population has a fund folio compared to 23% globally, or life insurance where there is only 3% premium proportion to GDP vis a vis 10% of top 5 countries, non-life insurance penetration being less than 1% compared to 4% globally and also amongst Bank branches with just 15 branches per 1000 population compared to 27 branches in developed countries. All of this offers a growth potential within the sector.”
The fund offers diversification opportunities within the segment, including investment in banks, non-banks, insurance, broking, asset management, and fintech. Investors looking for investment opportunities across all market caps and sub-sectors in the banking and financial services space may consider parking their money in this fund.
Q. How may one invest in this fund?
The minimum subscription amount is ₹5000, post which investors can put money in multiples of ₹1000. Once allotted, investors can park their earnings through both lump sum investments and systematic investment plans (SIPs). The minimum investment you make through SIPs is ₹500. The NAV has been capped at ₹10 per unit during the NFO period.
Investors can select the SIP date as any date from the 1st to the 31st of a given month/quarter. In case the chosen date is not available on account of being a non-business day, the SIP will be processed on the immediate next business day
Both direct and regular plans are available, though the NAVs of the above options will be different and separately declared; the portfolio of investments remaining the same.
Q. Are there similar mutual funds in the market?
This is not the first time that a banking and financial services fund has been introduced to the market. Prior to this, many asset management companies have launched such funds in the past.
| Name of the fund | Five-year returns |
| LIC MF Banking & Financial Services Fund | 6.56% |
| Tata Banking & Financial Services Fund | 12.07% |
| SBI Banking & Financial Services Plan | 10.05% |
| ICICI Prudential Banking & Financial Services Plan | 8.67% |
| Aditya Birla Sun Life Banking & Financial Services Plan | 8.66% |
| UTI Banking & Financial Services Plan | 5.83% |
| Mirae Asset Banking & Financial Services Plan | - |
| Nippon India Banking & Financial Services Plan | 8.64% |
| HDFC Banking & Financial Services Growth Plan | - |
| Taurus Banking & Financial Services Growth Plan | 11.59% |
| Invesco India Financial Services Plan | 10.05% |
| IDBI Banking & Financial Services Plan | - |
| Sundaram Financial Services Opportunities Plan | 11.14% |
| Source: MoneyControl | |
Q. How will the scheme benchmark its performance?
The performance of the scheme is measured against the Nifty Financial Services (Total Return Index). The benchmark index is designed to reflect the behaviour and performance of the Indian financial market such as banks, financial institutions, housing finance, NBFC, Insurance and other financial services companies. The index comprises of a maximum of 20 stocks. The composition of the aforesaid benchmark is such that, it is most suited for comparing the performance of the scheme.
Q. Are investors allowed to redeem their mutual fund investments?
The minimum redemption amount for all plans will be Rs. 1000/- or 100 units or account balance, whichever is lower. However, there are exit loads applicable on redemption from this fund.
- For redemption / switch out of up to 10% of the initial investment amount (limit) purchased or switched in within one year from the date of allotment: Nil
• If units redeemed or switched out are in excess of the limit within one year from the date of allotment: 1%.
• If units are redeemed or switched out on or after one year from the date of allotment: NIL
Q. Who will manage this scheme?
Shibani Sircar Kurian will be the fund manager for the equity investments of the scheme, Abhishek Bisen will be the fund manager for the debt investment of the scheme and Arjun Khanna will be the Dedicated Fund Manager for investments in foreign securities.
Q. Does the fund contain any inherent risk?
The scheme has been labelled as “Very Risky” as per the details mentioned in the Scheme Information Document and is best suited to investors willing to stay invested for a long period. However, investors must consult their financial advisers if in doubt about whether the product is suitable for them.
