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.
Sundaram Financial Services Opportunities Fund - Direct Plan
Reason for recommendation
The Indian equity market is going through one of the best phases in its recent history. The mutual fund industry is also reaping the benefit of this bull phase. Investment made through systematic investment plans (SIPs) has crossed the magical figure of Rs10,000 crore in September 2021. The market is expecting this dream run to continue for a while and there will be new leaders coming to the surface. We believe that the financial sector, especially banking, that has remained laggard till now may emerge to take the lead. One of the funds from this sector that is likely to perform going ahead is Sundaram Financial Services Opportunities Fund.
This fund has remained one of the best performers in its category over the past three years. It has generated annualised return of 22.24 per cent in the last three years compared to 18.55 per cent by its category and 16.55 per cent by its bench-mark. It has one of the best risk return statistics in its category, the best mean return in its category and stands second in terms of Sharpe Ratio and Sortino Ratio. Currently, the fund holds 26 stocks out of which more than 95 per cent are in banks and the rest in financial service companies, including insurance.
The major chunk of the fund’s corpus is parked with banking leaders such as HDFC Bank, ICICI Bank and SBI. In their recent results some of these banks have shown good growth in key operational metrics. The fund has also recently increased its stake in ICICI Bank that has remained an outperformer in the banking category and may continue to do so. This will help the fund to outperform. Nevertheless, an investor should understand that it is a sector fund and carries higher risk. Thus, one should take limited exposure to such funds.