Some Steam Left for Banking Funds?
In the first week of September, there is some cheer for mutual fund investment in India. When you compare mutual funds in India, the banking mutual funds started from where they left off last month. In the first week, they again outperformed their other mutual funds in India. They were so dominant in the Top 10 for the week ending September 08 that only one non-banking equity fund features in the list. But among the banking funds, exchange traded funds occupied the top three spots, with Kotak PSU Bank ETF giving returns in excess of 9 per cent. The Kotak ETF was followed by Bank BeES and Reliance Banking Exchange Traded.Fund, each giving returns in excess of 6 per cent. The only non-banking fund in the list was India Advantage (offshore) Fund. Meanwhile, the banking stocks seem to have some steam left as oil prices dropped to five-month low of $104, further taking off pressure on inflationary trends. Thus, the new Reserve Bank of Governor can get some more time to delay interest rate hikes, if any. The rate hike has affected the manufacturing sector the most. And so too the banks which have seen a decreasing credit offtake. Let us keep our finger crossed that the rate hikes are not too soon. Banking stocks are quoting at attractive valuations, said ICICI Securities, adding that banking could outperform the broader markets. And there could be another positive trigger lurking round the corner: the pending reforms in insurance and banking. And after the go-ahead from the Nuclear Suppliers Group, the government seems to have some time left to think over th
e next reform plan. Reflecting the trend in the broader markets, the index funds also had a good run, returning on average over 3 per cent. Birla Sun Life Index Fund (G) topped the list with 3.28 per cent returns. Magnum Index Fund (G) and ICICI Pru Index Fund-Nifty Plan took up the next two positions.
The new boss of the Reserve Bank of India in his first comments after taking the helm provided some cheer for the banking funds. He seems less hawkish on inflation when he said that the current inflation phase may be a short ¨Cterm phenomenon. However, he said it is too early to take a call whether inflation has peaked. In other positives, he said that he would not review opening banking sector further. He also said though there would not be any change in India's exchange rate policy, capital account convertibility remains high on the central bank's cards. Despite the good run of banking funds in the past two months, you should not be overinvested in a particular sector. The external environment may change at any moment. For example, the good news on oil may not last long if the OPEC cuts output if crude falls sharply. If you own other mutual funds in addition to banking funds, check out the weightage of the other fund's exposure to banking funds and recalculate you exposure to this sector. Keep balancing your portfolio at least once a year and strictly follow your quotient of debt equity ratio. In the debt fund pack, gilt funds again came on top, reflecting the trend seen in the previous month. Lotus India Gilt - Long Duration...topped the league with returns over 2.5 per cent, followed by DSP ML G-Sec Fund - A (G) at 2.1 per cent and Sahara Gilt Fund (G) at 1.3 per cent.
The new boss of the Reserve Bank of India in his first comments after taking the helm provided some cheer for the banking funds. He seems less hawkish on inflation when he said that the current inflation phase may be a short ¨Cterm phenomenon. However, he said it is too early to take a call whether inflation has peaked. In other positives, he said that he would not review opening banking sector further. He also said though there would not be any change in India's exchange rate policy, capital account convertibility remains high on the central bank's cards. Despite the good run of banking funds in the past two months, you should not be overinvested in a particular sector. The external environment may change at any moment. For example, the good news on oil may not last long if the OPEC cuts output if crude falls sharply. If you own other mutual funds in addition to banking funds, check out the weightage of the other fund's exposure to banking funds and recalculate you exposure to this sector. Keep balancing your portfolio at least once a year and strictly follow your quotient of debt equity ratio. In the debt fund pack, gilt funds again came on top, reflecting the trend seen in the previous month. Lotus India Gilt - Long Duration...topped the league with returns over 2.5 per cent, followed by DSP ML G-Sec Fund - A (G) at 2.1 per cent and Sahara Gilt Fund (G) at 1.3 per cent.
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