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SBI Banking & Financial Services Fund – Don’t bank on it

SBI Mutual Fund recently launched a banking fund. Investors should be wary of the risk associated with such schemes 

 

SBI Mutual Fund recently launched an open-ended banking sector fund— SBI Banking & Financial Services Fund. Over 80% of the schemes’ portfolio will be invested in stocks of companies which are engaged in banking and financial services. The scheme would invest in banks as well as non-banking financial services companies, insurance companies, rating agencies, broking companies, microfinance companies, housing finance, wealth management, stock/ commodities exchange etc.
 
As of now there are nine banking mutual funds and five exchange traded funds which invest in banking stocks. Investors will now have one more option to choose from in the form of SBI Banking & Financial Services Fund. Sector funds are risky because of the concentration on a single sector. 
 
Fund houses have covered nearly every hot sector and theme. SBI Mutual Fund is one of the oldest fund houses and it currently manages over 25 equity schemes (including close-ended schemes). This list includes five sector focussed schemes covering FMCG, information technology, infrastructure, pharmaceuticals and public sector units.
 
The banking sector has been a ‘hot’ sector over the past year, with the schemes of this sector returning over 80% over one year. Fund houses usually launch a sector-focussed scheme when that particular sector is doing well, in order to attract investors. SBI Mutual Fund seems to be following the same practice.
 
Sohini Andani will be the fund manager of the scheme. She has 16 years of experience in the area of financial services. She also manages SBI Magnum MidCap Fund & SBI Blue Chip Fund.
 
Should you invest?
 
Banking funds were among the top sector funds over the past year. Over the past one year the CNX Finance Index has delivered a return of 82% as on 18 February 2015. But investing in sector funds is risky. If you mistime your investment, it could result in a loss of capital.
 
The chart below depicts the one year return of the CNX Bank Nifty index each quarter. The returns have varied from a high of 77% seen in the quarter ended September 2014 to a low of -28% for the quarter ended December 2011.
 
 
Would now be a good time to invest in banking stocks? In terms of valuations, the price-to-earnings ratio (PE) of the Bank Nifty index has risen to 19.96 from a PE of just 11 a year ago. The long term average PE of the Bank Nifty is 12.43. At the current level the PE is at two standard deviations away from the mean, which means, the Bank Nifty is commanding a very high valuation. The last time the Bank Nifty was quoting a PE above 20 was in December 2010.
 
As per our analysis, this may not be the best time to invest in banking stocks.
 
If you are looking to invest for the long term, you should avoid looking for short-term gains by trying to time a particular hot sector. We suggest one should invest regularly in top performing equity diversified schemes.
 
Take a look at the list of top performing equity diversified schemes here— https://savers.moneylife.in/equity_mutual_fund.html
 
Additional Scheme Details
 
Benchmark Index: CNX Finance Index
 
Minimum Initial Purchase: Rs5,000 and in multiples of Re1 
 
Additional Purchase: Rs1000 and in multiples of Re1 thereafter
 
Minimum Redemption: Rs1000 or 100 units or account balance whichever is lower
 
Exit Load
 
For exit within 12 months from the date of allotment: 2% 
For exit after 12 months but within 18 months from the date of allotment: 1% 
For exit after 18 months from the date of allotment: Nil
 
Expense Ratio
 
Maximum total expense ratio (TER) permissible under Regulation 52 (6) (c) (i)-Upto 2.50%
 
Additional expenses under regulation 52 (6A) (c) - Upto 0.20%
 
Additional expenses for gross new inflows from specified cities - Upto 0.30%
 

User

COMMENTS

Dhanaji Kenjle

2 years ago

Hello MoneyLife,

Wishing all of US(hum sub lok!!!) on Women's Day an Very Moneyed Life and
a Safe Life.....by the way Your info on
SBI ETF Bank NFO shows that if fund is redeemed within 12mnths load is 2% whereas from other sources including SBI
MF the load, if redeemed within 12 mnths
is NIL ???

With Best Wishes
Capt Kenjle

Vaibhav Dhoka

2 years ago

When market is heated mutual fund houses come out with new schemes and many small investors fall prey to such schemes.Instead one should go in established scheme.

SuchindranathAiyerS

2 years ago

SBI mutual funds are like LIC or UTI. They are run by bureaucrats like a Bharath Sarkat Ki Sampathi and have no competeitive professional management. Just as India's culture, built on the socio-metric politics of constitution, laws, extortion and non accountability militates against India ever being a regional power or a great power, its Bharath Sarkar Ki Sampathi, truly reflective of the culture, can never be performers. I speak from personal experience of both India, State Bank of India and the SBI mutual funds.

Bank strike deferred: Employees get 15% wage hike; Offs on second, fourth Saturdays

Trade unions finally managed to get a good deal -- a 15% hike in wages coupled with second and fourth Saturday off -- from bank managements after protracted negotiations

 

Bank unions across the country have decided to defer their 25th February strike following negotiations with the Indian Banks' Association (IBA). As per the settlement, bank employees would get a 15% hike in wages from 1 November 2012 as well as holidays on every second and fourth Saturdays. Following the settlement, the four-day strike of employees from nationalised banks scheduled to start from 25th February has been deferred, said CH Venkatachalam, General Secretary, All India Bank Employees Association (AIBEA).
 
Though bank employees would have second and fourth Saturday off, they will have to work for full day on the first and third Saturdays.
 
In a statement, IBA said, "Both sides agreed to work out detailed Bipartite Settlement/ Joint Note within 90 days. UFBU representing five workmen unions and four officers associations, NUBE and BKSM were parties to today's agreement."
 
The wage hike will be applicable to nearly 10 lakh employees in public sector banks, old generation private sector banks and some foreign banks, Mr Venkatachalam said.
 
The strike call was given by United Forum of Bank Unions (UBFU), which has more than 10 lakh employees and officers of banking Industry under its umbrella. The UFBU is an umbrella organisation comprising of nine bank staff unions. According to earlier reports, there are 27 public sector banks in the country.
 
Public sector bank employees have been calling for a wage revision from November 2012 and various talks with the IBA were not successful even though the Unions have been conducting strikes over the years.
 

User

COMMENTS

Radhakrishnan Subramanian

2 years ago

Any reason why the Unions are observing this tight silence on what is in store, if at all any, for the pensioners in general and pensioners who retired prior to 2002, in particular. Though Bank pension is also as per rules and regulations of Central Pension Scheme, no revision is considered so far though Central Govt. employees and State Govt. Pensioners are benefitted upon implementation of the pay Commission report. Why this anomoly. Acchhe dhin aayega kya nahi.

Sushil Jain

2 years ago

Sir,why not at this time of wage revision negotiation , the leaders have NOT discussed the matter of REVISION OF PENSION,which should be LINK WITH THE EVERY REVISION OF WAGE, REASON ,[Though it is NOT in Bank Employee's pension regulation] IS BEST KNOWN TO them [leaders]ALL RELATED,leaders the EMPLOYEE, The day will come soon when today's leader shall come in the same line of Retired employees. HENCE THEY MUST HAVE TAKEN UTMOST CARE OF OLD / AGED persons for medical benefits . Further NO consideration of every retired bank senior citizen,to get the Medical Treatment .one more thing , why an officer is getting the HRA ,150% on capital cost basis,it should be stopped with immediate effect,why not a normal HRA is to be paid , in this Xth BPS , PLEASE CONSIDER IT OTHERWISE. It is understand that in a bank on retired bank employee , some banks are giving medical benefits to retired employees that too is little amount, Bank as a whole should take / ask the retired employee to join mediclaim policy and the premium be born by the BANK.

Ravi Patnaik

2 years ago

No respite for Bank Pensioners from penury.

Gurudutt Mundkur

2 years ago

Glad that the "poor guys" are getting relief. Or else they would have been starving and begging on the streets within the next three or four months!

Gopinath Prakash

2 years ago

WHAT ABOUNT WORKING HOURS TO OFFICERS

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