Thematic or sectoral mutual funds enable investors to concentrate investments on any specific industry or sector, allowing them to invest all their assets in equities or equity-related instruments. By opting for the best banking sector mutual funds, you can invest in stocks of any banking or financial sector companies.
With banking sector mutual funds, you can target the core providers in the banking industry to generate high returns in the long run. The fund managers as per their vision and objectives can choose to invest in large, medium or small-cap banking sector companies.
Continue reading this blog to gain detailed insights on a top-ranking list of mutual funds in the banking sector to invest in 2024 and so on.
What Are Banking Sector Mutual Funds?
Banking sector mutual funds fall under a specialised category of equity funds, specially designed to focus on the banking companies. These funds are allocated primarily towards equities or equity-related instruments within the banking industry.
Mutual funds are introduced in the banking sector to boost investment in the economy. When the banking sector performs well, these funds are expected to be at their best.
It provides investors with an opportunity to invest and gain exposure from a diversified portfolio of banking securities while letting them capitalise on the potential growth of a particular banking sector.
On that note, Groww Mutual Fund, formerly known as Indiabulls Mutual Fund, is launching a BFSI fund. It’s an open-ended equity scheme that aims to invest in banking and financial service-related sectors. The New Fund Offer will open on January 17, 2024, and will close on January 31, 2024.
How do Banking Sector Mutual Funds Work?
Banking sector mutual funds are invested across two industries, the core banking industry and the financial industry. Under this type of sectoral fund, at least 80% of the total investment must be allocated to stocks of companies relating to banking and financial services, as per the SEBI guidelines.
Who Should Invest in Banking Sector Mutual Funds?
If you have a high-risk tolerance as an individual investor, investing in a banking sector mutual fund could be suitable for you. Since these are equity schemes, the fund comes with high levels of risk. At the same time, you can get high returns if the market is performing well.
On the other hand, if the banking sector is facing a downturn, the stocks will lose their value. Thus, if you are an experienced investor and have a proper understanding of sector dynamics, invest in banking sector funds. Alongside, if you have long-term investment planning, you can invest in these mutual fund schemes. It is beneficial for a long-term scenario, considering that you have surplus funds for allocation during an extended horizon.
What Are the Advantages of Investing in Banking Sector Mutual Funds?
Here are some advantages of investing in mutual funds for banking sector:
- Return Potential
If the economy is performing well, you can expect high returns from banking sectoral mutual funds. Even during periods of downfall, the stocks of these companies do not lose their value drastically. Hence, the return potential of banking sector mutual funds appears positive to investors.
- Long Term Horizon
Banking sector mutual funds could help you achieve your long-term financial goals. Thus, as an investor, if you are looking to fulfil your long-term objectives such as funding children’s education, and meeting marriage expenses, you may consider investing in a BFSI fund. It may help in capital appreciation and accumulation of wealth over a long-term period.
- Investment in Big Companies
Generally, the companies involved in the banking sector are large-cap firms with a stable market outlook and better growth opportunities. If you invest your money in banking sector mutual funds, you will get exposure to large-cap organisations that will offer you better return potential.
What Are the Best Banking Sector Mutual Funds to Invest in 2024?
The following table shows the best mutual funds in banking sector in 2024.
| Fund Name | Fund Size (In Crores) | 5Y Returns |
| ICICI Prudential Banking & Services Fund | 7,447 | 12.05% |
| LIC MF Banking & Financial Services Fund | 308 | 13.29% |
| Baroda BNP Paribas Banking & Financial Services Fund | 112 | 12.93% |
| UTI Banking & Financial Services Fund | 1,002 | 10.68% |
| Taurus Banking & Financial Services Fund | 10 | 14.12% |
| Tata Banking & Financial Services Fund | 1,939 | 15.62% |
| Sundaram Financial Services Opportunities Fund | 1,085 | 18.08% |
| Aditya Birla Sun Life Banking & Financial Services Fund | 3,062 | 13.06% |
| Nippon India Banking & Financial Services Fund | 5,192 | 14.02% |
| SBI Banking & Financial Services Fund | 4,828 | 13.99% |
| Invesco India Financial Services Fund | 667 | 15.02% |
The Bottom Line
By investing in banking sector mutual funds, you can get exposure to a top-performing sector of the economy while being able to diversify your portfolio. At the same time, it is important to note that there is a huge risk involved in sectoral mutual funds compared to any other type of mutual funds.
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Hence, before initiating investment in any of the above-mentioned best banking sector mutual funds, it is in your best interest to consider the risk profile, performance, expense ratio and diversification of the fund.
