Should you invest in the new HDFC Banking & Financial Services Fund? | Economic Times

HDFC Mutual Fund has launched a new scheme- HDFC Banking and Financial Services Fund. The new fund will invest in banking and financial services sector across segments and market capitalization including, banking, broking, asset management, wealth management, insurance, non-banking financial companies (NBFC). The fund will also focus on opportunities in new listings including pre-IPO participation in lending, insurance, capital market businesses and fintechs. The NFO of the scheme closes on June 25.“Over last two decades the banking and financial services sector has grown faster than the GDP. Despite this growth in the past, the penetration of various banking and financial services in Indian economy is low. Which means there is a scope for this sector to continue to grow. Banking and financial services put together account for one fourth of India’s total market capitalization. It offers a well-diversified investment opportunity and hence we are launching this fund,” says Anand Laddha, Fund Manager, HDFC Banking & Financial Services Fund. The minimum investment in the NFO is Rs 5,000. The scheme will charge 1% for redemption within 365 days. The fund is benchmarked against NIFTY Financial Services TRI. The fund is a sector scheme and hence falls in the very high risk category.Should you invest?"The fund is a sectoral fund and will only invest in the banking and financial services sector. The banking and financial services sector has done well throughout the years and hence it is the top sector across most equity diversified funds. The sector has the potential to do well in future if the India story goes strong. However, it is a sectoral fund and has to restrict its investment within the banking and financial services sector. Most of the sectoral funds are cyclical in nature and they also have concentrated portfolios, hence the risk on these funds is higher compared to diversified funds," says Harshad Chetanwala, Founder, MyWealthGrowth, Mumbai. Chentanwala adds, "Also, if the fund manager of an equity diversified fund sees more opportunity in the sector, they can increase their allocation to take advantage of growth prospects of the sector. Though sectors like banking, financial services and IT have been doing well over years, investors who already have well diversified portfolios would have taken advantage via their diversified schemes. However, if one has to bet on the financial services theme and has a high risk appetite, one may consider investing in a banking and financial services fund with limited allocation. The sector already has more than 10 funds and one can study them as well before investing. The existing schemes have a track record and hence can be judged better than a new fund. Those investors who are building their investment portfolio with mutual funds and have low or moderate risk appetite should avoid sectoral funds."