Fund of Fortnight
This is our mutual fund recommendation. Every fortnight ,we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.
SBI Banking & Financial Services Fund - Direct Plan (Growth)
Reason for recommendation
Global equities around the globe are extending their rally and most of the indices are touching their lifetime high. What is also evident is that there is a sector rotation from the pandemic which is beneficiary to economically sensitive sectors. Hence, a strong rally was seen in the financial stocks and energy stocks. India is no exception and the banking sector has witnessed a sharp rally which is yet to fully recover from the pandemic’s blow. Therefore, as the economy moves towards normalisation, the banking and financial sector is likely to gain the most. To derive maximum rewards from this rotation of sectors, we are recommending SBI Banking and Financial Services Fund. This fund is the best performing fund among its category. While its benchmark and peers are down by double-digits year-till-date, the fund has managed to arrest its fall to a single digit. It has been able to outperform its peers and benchmark in both, the falling market such as in the year 2018 and the rising market in 2017. Even in terms of risk measures, the fund stands out among its peers as it has the best Sharpe ratio and highest alpha.
The fund is a large-cap-oriented fund holding 74 per cent in large-cap stocks and 15 per cent in small and mid-cap stocks. The fund holds almost 60 per cent of its assets in private sector large-cap banks, which are likely to perform better going ahead as they are likely to gain market share. In the event of economic growth picking up, the banking and financial sector will be able to get the desired tailwind to boost its momentum. Hence, investors with high risk appetite (as it is a sectoral fund) can make tactical investment in this fund with investment horizon of more than one year.
