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Wealth Creators

The banking funds have whopping returns over the past one year. The equity funds investing in the banking sector also gave the best returns over the one-year period.

There are three banking funds today - Reliance Banking, UTI Banking and Benchmark Banking BeES. Five more ETFs are likely to be launched soon, two from Kotak, two from Benchmark and one from Reliance. The reason is understandable - Benchmark's Banking BeES is a Rs 5,845- crore fund today. The banking funds have delivered eye popping returns - over 82 per cent over the past one year (as on July 3, 2007). And for those investors who posed their faith in the banking sector were the most rewarded while the appreciating rupee hit the technology sector.

The equity funds investing in the banking sector gave the best returns over the one-year period ending July 3, 2007. Over this period banking funds category delivered a whopping 83.72 per cent.

If we talk of individual performance of Reliance Banking and UTI Banking Sector, both of them have delivered over 82 per cent over the same period. The BSE Bankex has also risen over 65 per cent over this period. More importantly, the buying pattern of the diversified equity funds shows their liking for financial services. From 8.93 per cent in June last year, the financial services now commands 12 per cent of the total AUMs of equity diversified funds. To reiterate, as many as 42 equity diversified funds have a banking stock in their top five holdings.

Among the most prominent stocks in this space is the SBI, which figures in the portfolio of 69 equity diversified mutual funds. The stock has shown spurt over talks of dilution of its equity stake in its seven subsidiary banks to 51 per cent. The bank's scrip has risen 113 per cent over the last one year and the rally has been more steep in the past few months. No wonder then that Reliance Banking has over 18 per cent in SBI and is its top holding. UTI Banking Sector has 15 per cent of its AUMs in SBI. Other equity diversified funds like Fidelity Equity, Sundaram BNP Paribas Select Focus, DSPML Opportunities, HDFC Top 200 etc have also been increasing exposure to SBI.

Similarly ICICI Bank's scrip had been on fire. This bank was held by 68 mutual fund schemes in May, much more than the schemes in April 2006 (41).

Of course the fund managers are waiting to read the contours in 2009 when the banking sector will be opened up. “The stock prices of banks reflect their growth. A lot of foreigners are looking to invest in this sector. Due to the restrictions they are investing through bank ETFs. The next trigger will be in 2009,” said Mugunthan Siva, CIO, OptiMix.