Mirae Asset Banking and Financial Services Fund: Should You Bank on it?

Nov 27, 2020

A healthy financial sector is an important indicator of economic growth and the backbone of any economy. As India progresses from a developing economy to a developed economy, the financial sector will have a crucial role to play.

In India, the penetration across financial products remains very low as compared to other nations, which provides ample room for growth. The boost to digital modes of transactions and financial inclusion initiatives could give push to these products, leading to increased profitability for companies in the banking and finance sector.

The sector has been a key driver for the equity markets as well, outperforming broader market indices during economic growth.

On this backdrop, Mirae Asset Mutual Fund has launched Mirae Asset Banking and Financial Services Fund. The fund will apply various quantitative and qualitative filters to identify high quality growth businesses available at reasonable margin of safety.

Being a sectoral fund, Mirae Asset Banking and Financial Services Fund is mandated to invest minimum 80% of its assets in equity & equity related instruments of companies engaged in banking and financial services sector. The performance benchmark index of the fund is NIFTY Financial Services Total Return Index.

Mirae Asset Banking and Financial Services Fund is an open-ended equity scheme that will seek to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in banking and financial services sector. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved.

Table 1: Details of Mirae Asset Banking and Financial ServicesFund

Type An Open ended Equity Scheme investing in Banking & Financial Services Sector Category Sectoral Fund
Investment Objective To generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in banking and financial services sector. However, there can be no assurance that the investment objective of the Scheme will be achieved.
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10/- per unit
Plans
  • Direct
  • Regular
Options
  • Growth
  • Dividend
Entry Load Not Applicable Exit Load
  • - An Exit Load of 1% is payable if Units are redeemed / switched-out upto one year from the date of allotment;
  • - Nil if Units are redeemed / switched-out after one year from the date of allotment
Fund Manager - Mr Harshad Borawake
- Mr Gaurav Kochar
Benchmark Index Nifty Financial Services (Total Returns Index)
Issue Opens: November 25, 2020 Issue Closes: December 04, 2020
(Source: Scheme Information Document)

Investment strategy - Mirae Asset Banking and Financial ServicesFund

Mirae Asset Banking and Financial Services Fund will endeavour to participate in the growth of banking and financial services sector by investing minimum 80% of its assets in equity and equity related instruments of companies in the sector. The sector includes but is not limited to:

  1. Banks, NBFCs, HFCs, MFCs,

  2. Broking and securities,

  3. Stock exchanges,

  4. depositories and related infrastructure providers,

  5. Wealth management or various kinds of asset management,

  6. Insurance, currency and forex, Credit cards

  7. Payment gateways or such infrastructure providers, digital financial institutes, rating agencies and investment companies.

The fund will utilise a fundamental, bottom-up approach to identify growth companies, which have high return ratios and possess sustainable competitive advantage. Its holdings will typically range between 15-30 stocks. The fund has the flexibility to invest across market capitalization in companies within this theme. The Fund Managers will monitor the trading volumes in a particular stock before investment to avoid liquidity risk.

The fund's asset allocation pattern under normal circumstances will be as under:

Table 2: Asset Allocation of Mirae Asset Banking and Financial ServicesFund

Instruments Indicative Allocation
(% of assets)
Risk Profile
Minimum Maximum High/Medium/Low
Equity and Equity related instrumentsof companies in the Banking and Financial Services Sector in India 80 100 High
Other equities and equity related instruments 0 20 High
Debt and money market instruments including schemes of mutual fund 0 20 Low to Medium
Units of REITs &InvITs 0 10 Medium to High
(Source: Scheme Information Document)

The fund has the flexibility to invest up to 20% of its assets in equity and equity related instruments other than companies in the Banking and Financial Services Sector in India, as well as debt and money market instruments, mutual fund schemes, and units of REITs & InvITs.

Who will manage Mirae Asset Banking and Financial ServicesFund?

Mirae Asset Banking & Financial Services Fund will be managed by Mr Harshad Borawake and Mr Gaurav Kochar.

Mr Harshad Borawake is the Head - Research at Mirae Asset Global Investments (India). Mr Borawake is MBA (Finance) & B.E. (Polymers). Prior to joining Mirae Asset Mutual Fund in December 2016, he has worked with Motilal Oswal Securities Ltd. as Vice President and Capmetrics & Risk Solutions Private Ltd. as Research Analyst - Equity.

Borawake also manages the AMC's prominent schemes like Mirae Asset Large Cap Fund and Mirae Asset Hybrid Equity Fund, among others.

Mr Gaurav Kochar is a chartered accountant having professional experience of six years. His primary responsibility includes analysis of BFSI sectors. Prior to this assignment he was associated with Kotak Bank as an Internal Auditor for 3 years, later worked for almost 2.5 years in Ambit Capital as a Research Analyst - Banking. Currently he is not managing any other Scheme of the fund house.

Fund outlook - Mirae Asset Banking and Financial ServicesFund

Mirae Asset Banking and Financial Services Fund will invest 80% of its assets in equity and equity related instruments of companies in the banking and finance sector with the flexibility to invest across market capitalization.

The pace of economic recovery will play a crucial role in the overall performance of the sector and thus one cannot ignore the impact a second wave of pandemic outbreak could have on the pace of recovery.

Sector focused funds follow a concentrated investment approach towards specific sectors and are high-risk investment proposition. They are suitable only for aggressive investors who understand the sector well and can take timely investment calls.

Given that most diversified equity funds can give you adequate exposure to the banking and finance sector, investors having moderate to high risk appetite can skip the idea of investing in a sectoral fund. However, if you willing to take high risk in anticipation of higher returns, ensure that you have an investment time horizon of at least 5 to 7 years while investing in Mirae Asset Banking and Financial Services Fund.

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Warm Regards,
Divya Grover
Research Analyst

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