The Mutual Fund Show: Should You Invest In Banking And Financial Services Schemes?

The banking, financial services and insurance sector has been under some stress in the last two months, say analysts.

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Investors interested in thematic mutual fund schemes have an option of investing in banking and financial services funds.

While the banking, financial services and insurance sector has been under some stress in the last two months, it is in good health overall and the pressure on stocks is only making the valuation better, according to Trupti Agrawal, fund manager of WhiteOak Capital AMC.

"(The) Sector is in very good health. The credit growth has been holding up... When any industry does well and if the stocks don't move, then logically and mathematically, the valuations (are) just starting to become attractive," Agrawal told NDTV Profit.

The sector is seeing growth with profitability being intact, she said. Credit growth and return on equity for the sector is good, according to her.

The sector has also been using the growth in margin to make investments towards expanding operations and creating buffers for times when the asset quality will bite, she said.

"Entering the sector at this time just gives better margin of safety. From a valuation standpoint, we are nowhere in the overheated territory."

However, Vishal Doshi, a partner at Alpha Investment Services, said that he would not recommend the sector to his clients. "BFSI is the main component of Nifty. Having said that, the weightage of the sector is at the lowest in the last 10 years. So, to bet right now on BSF funds is like a contra call," he said.

However, if an investor wants to make a play at the financial sector, then such funds make an interesting choice, he said.

Query 1: My monthly pension is Rs 30,000 and expenses approximate to Rs 25,000. I would like to invest my retirement benefits of Rs 40 lakh in mutual funds. I do not have any other investments at the moment. Can you suggest a suitable mutual fund scheme, or any other investment scheme?

Name: P Anbazhagan | Age: 61 years

Vishal Doshi: He has a corpus of Rs 40 lakh. He can have a mix of schemes, from large and mid-cap segment, and flexicap. Given where we are in the markets right now, I feel these two categories will do justice for his portfolio.

Actually, a lot depends on his risk profile and the kind of risk he is willing to take in the market. But yes, a mix of large and mid-cap, as well as some multi-asset funds will do well for him. Debt is also looking attractive right now. So large, mid-cap and multi-asset funds, and flexi-cap funds.

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