Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund: Should You Invest?
Mitali Dhoke
Jul 19, 2022
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India's financial sector has faced various financial challenges and the recent one being the uncertainties amidst the pandemic. As one of the four pillars that support the nation's economic growth, the financial sector plays a major role in accelerating the economic revival.
Further restrictions are being implemented, requiring banks and non-banking financial institutions to be more regulatory-sensitive in light of the Reserve Bank of India's (RBI) emphasis on financial inclusion and digital banking models. To control banking and lending practices and ensure a more rapid economic recovery, the RBI has been striving to develop technological and compliance requirements for banks and financial institutions.
The financial sector, which comprises banking and non-banking institutions for loans, insurance, investments in capital markets, etc., is one such industry that is intricately connected to most individuals' lives. The financial sector is taking advantage of a number of growth prospects, including the continuous expansion of credit, the expansion of NBFCs' credit operations, and the significant increase in the issue of new credit cards due to the rise of the young workforce. Additionally, low insurance penetration and thriving capital markets are two important growth areas for the financial sector.
Many investors want to take advantage of the financial sectors' growth potential, yet they somehow only have a small exposure to banking stocks. Investors may consider investing in an index that offers exposure to the financial sector beyond banks. Motilal Oswal Mutual Fund has launched Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund. It is an open-ended Index fund replicating/tracking the S&P BSE Financials ex Bank 30 Total Return Index.
On the launch of this Fund, Mr Navin Agarwal, MD & CEO at Motilal Oswal Asset Management Company Ltd, said, "With an objective to bring new investment opportunities through innovative products, we built a new concept to leverage wealth creation opportunities beyond just banks within the financial services sector. With India's urban population set to grow to 50% from the current 35%, the migration will trigger the transfer of money from the S&P BSE Financials Ex-Bank 30 Index has outperformed the S&P BSE 250 Large Midcap index over the last 15 years, on a total returns basis. The index has noted a CAGR of 15.3% vs S&P BSE 250 Large Midcap Index 14%, outperforming the broad market by more than 1%. It has also been observed that the index tends to do well during a bull & recovery cycle."
Table 1: Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund
| Type |
An open-ended Index fund replicating/tracking the S&P BSE Financials ex Bank 30 Total Return Index |
Category |
Index Fund |
| Investment Objective |
The investment objective of the scheme is to provide returns that correspond to the total returns of the securities as represented by S&P BSE Financials ex Bank 30 Index, subject to tracking error. However, there is no guarantee or assurance that the investment objective of the scheme will be achieved. |
| Min. Investment |
Rs 500/- and in multiples of Re 1 thereafter. Additional Rs 500/- and in multiples of Re 1 thereafter |
Face Value |
Rs 10/- per unit |
| Plans |
|
Options |
|
| Entry Load |
Not Applicable |
Exit Load |
- 1%- If redeemed on or before 15 days from the date of allotment. Nil-
- If redeemed after 15 days from the date of allotment.
|
| Fund Manager |
Mr Swapnil Mayekar
Mr Abhiroop Mukherjee |
Benchmark Index |
S&P BSE Financials ex Bank 30 Total Return Index |
| Issue Opens: |
July 14, 2022 |
Issue Closes: |
July 22, 2022 |
(Source: Scheme Information Document)
The investment strategy for Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund will be as follows:
Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund will follow a passive investment strategy and seek to invest in the constituents of the S&P BSE Financials ex Bank 30 Index in the same proportion (weights) as the index and track the benchmark index.
The investment strategy would involve offering investment returns that are similar to the total returns of the S&P BSE Financials ex Bank 30 Total Return Index before fees/expense and subject to tracking error. The endeavour will be to reduce the tracking error to the least possible point through regular rebalancing of the portfolio, taking into account the change in weights of stocks in the index as well as the incremental collections/redemptions in the scheme.
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The scheme aims to invest in the constituent of the S&P BSE Financials ex Bank 30 Total Return Index, in the range of 95% to 100%. The scheme would invest in units of Liquid/Debt schemes and Debt and Money Market Instruments, as stated in the asset allocation table.
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund
| Instruments |
Indicative Allocation (% of net assets) |
Risk Profile |
| Minimum |
Maximum |
High/Medium/Low |
| Constituents of S&P BSE Financials ex Bank 30 Total Return Index |
95 |
100 |
Very High |
| Debt and Money market instruments, units of Liquid/ debt schemes. |
0 |
5 |
Low |
(Source: Scheme Information Document)
About the benchmark
The S&P BSE Financials ex Bank 30 Index seeks to measure the performance of 30 non-banking Financials stocks as identified by GICS®, from the constituents of the S&P BSE 250 LargeMidCap Index - Financial sector. These stocks are the largest among financials and are selected based on six-month daily float-adjusted market capitalisation. The index excludes banks. The S&P BSE Financials ex Bank 30 TRI has significantly outperformed the Nifty 50 TRI over the last 15 years.
Here's the list of top 10 constituents by weightage and sector representation under the index as of June 30, 2022:
(Source: Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund PPT)
Note that the index rebalancing is undertaken semi-annually in June and December.
Who will manage Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund?
Mr Swapnil Mayekar and Mr Abhiroop Mukherjee will be the dedicated fund managers for this scheme.
Mr Swapnil Mayekar will be managing the equity portion of the portfolio. He has over 11 years of experience in fund management and product development and has completed a Master of Commerce in (Finance Management). Prior to joining Motilal Oswal Asset Management Company Ltd., he was associated with Business Standard as Research Associate.
At Motilal Oswal AMC, Mr Mayekar currently manages Motilal Oswal Nasdaq 100 Fund of Fund, Motilal Oswal Nifty Bank Index Fund, Motilal Oswal Nifty 500 Fund, Motilal Oswal Nifty Midcap 150 Index Fund, Motilal Oswal Nifty Small cap 250 Index Fund, Motilal Oswal Midcap 100 ETF, Motilal Oswal M50 ETF, Motilal Oswal Nifty 50 Index Fund, Motilal Oswal Nifty Next 50 Index Fund, Motilal Oswal Nifty 200 Momentum 30 ETF, Motilal Oswal Nifty 200 Momentum 30 Index Fund, Motilal Oswal S&P BSE Low Volatility Index Fund, and Motilal Oswal S&P BSE Low Volatility Index Fund.
Mr Abhiroop Mukherjee will be managing the debt component of the portfolio. He is a B. Com (Honours) graduate, holds PGDM (Finance) degree, and has over 13 years of experience in Debt and Money Market Instruments, Securities trading, and fund management. Before joining Motilal Oswal AMC as Associate Vice President - Debt and Money Market Instruments, he has worked with PNB Gilts Ltd. as an Assistant Vice President - Debt and Money Market Instruments.
At Motilal Oswal AMC, Mr Mukherjee currently manages Motilal Oswal Ultra Short Term Fund, Motilal Oswal Liquid Fund, Motilal Oswal 5 Year G -Sec ETF, Motilal Oswal 5 Year Gsec Fund of Fund, Motilal Oswal Focused 25 Fund, Motilal Oswal Midcap 30 Fund, Motilal Oswal Flexicap Fund, Motilal Oswal Long Term Equity Fund, Motilal Oswal Dynamic Fund, Motilal Oswal Nasdaq Fund of Fund, Motilal Oswal Equity Hybrid Fund, Motilal Oswal S&P 500 Index Fund, Motilal Oswal Asset Allocation Passive Fund of Fund - Conservative, Motilal Oswal Asset Allocation Passive Fund of Fund - Aggressive, Motilal Oswal MSCI EAFE Top 100 Index Fund, and Motilal Oswal NASDAQ Q 50 ETF
Fund Outlook - Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund
Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund aims to provide returns that closely correspond to the total returns as represented by the S&P BSE Financials ex Bank 30 Index, subject to tracking errors.
The scheme allows investors to invest in a benchmark that captures the capital market performance of the top 30 non-banking financial stocks. Currently, the underlying S&P BSE Financials ex Bank 30 Index includes stocks of Housing finance companies, NBFCs, Exchanges, Asset Management Companies, Insurance, Card Payment & Fintech etc.
The Fund will enable Indian investors to capitalise on the growth of financialisation of assets, shifting consumer mindset from saving to investing and benefit from the companies that will gain from the consumption theme. The fortune of this scheme will be closely linked to how the S&P BSE Financials ex Bank 30 Index performs.
However, do note that the persistent repercussions of the Russia-Ukraine conflict, rising interest rates, and spiralling inflation are all issues that represent a significant risk to economic growth and are the root cause of the prevailing high market volatility. Being a sectoral Index Fund, the scheme will be prone to high volatility compared to other diversified equity funds and concentration risk due to its limited exposure to up to 30 stocks in the financial sector.
These factors, among many others, could have a bearing on the Scheme's performance and may affect negatively if the sector moves out of favour. This makes the scheme a highly risky investment proposition. Only those investors with a high-risk appetite and a long investment horizon of at least 5-7 years may consider this scheme.
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Warm Regards,
Mitali Dhoke
Jr. Research Analyst