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Bee Sting

The banking sector has done well in the recent past & the performance has rubbed off on Banking BeES as well. An ETF, Banking BeES tracks the Bank Nifty and has generated good returns in the past year

Banking BeES is a very large banking fund. An Exchange Traded Fund (ETF), it tracks the Bank Nifty. Though the fund's AUM has fluctuated very widely, its assets went up steadily after March 2007. From Rs 3,300 crore (March 2007), the fund has doubled its AUM to Rs Rs 7,000 crore (October 2007). In November 2007, the fund's AUMs touched an all time high of Rs 7446.50 crore.

However in January 2008, the fund's AUMs dropped to Rs 4253.40 crore. To reiterate that investors in banking funds have been rewarded handsomely, consider the returns of this fund. With a 49.07 per cent return, Banking BeES has been the top return generator among the index funds in the one-year period ending March 4, 2008. However in the three year period the fund has slipped and figures in the bottom quartile of the index funds category. The fund's return in 2007 stood at 65 per cent.

However, bear in mind that despite the highs, the fund has witnessed steep falls during market corrections. This could unnerve many investors. For instance, in the June 2007 quarter, the fund delivered 28 per cent, much more than the category's 13.72 per cent. Yet, a year ago (June 2006 quarter), the fund was down around 20 per cent when the category's loss was just 7 per cent. This was repeated in March 2007 when the fund fell around 20 per cent, while the category's loss was restricted to just 5 per cent. One reason for this banking fund's huge size is the huge FII interest in the fund. FIIs are taking the ETF route to invest in the banking sector in India since they have hit the ceiling of investment in most banks.

The fund has always maintained a portfolio of 12-15 stocks and its top holding is ICICI Bank, which had been battered in the markets after the news of it taking a loss of around Rs 1,000 crore due to subprime came to fore. The fund's another aggressive holding is SBI. Between ICICI Bank and SBI, the fund's AUMs are over 50 per cent. The top five holdings form 80 per cent of its assets.

In the recent past the banking stocks have done exceedingly well, resulting in high returns for the banking sector dedicated funds. In fact the financial services sector has emerged as the most preferred sector of the various equity diversified funds as well.