The Indian banking, financial services, and insurance (BFSI) sector is poised for significant growth in the coming years, driven by factors such as increasing financial inclusion, rising middle-class aspirations, and technological advancements. To capitalize on this promising opportunity, DSP Mutual Fund has launched the DSP Banking & Financial Services Fund through NFO, an open-ended equity scheme that invests in domestic and overseas companies engaged in the BFSI sector.
The primary investment objective of the DSP Banking & Financial Services Fund – NFO is to seek to generate returns through investment in equity and equity-related securities of companies engaged in the banking and financial services sector.
The open-ended equity scheme’s NFO offers investors an opportunity to capitalize on the growth potential of both domestic and overseas BFSI companies through a stock-specific and high-active-share approach. With no entry or exit load, except in the case of switching plans, investors can start with a minimum subscription amount of Rs. 100.
The fund provides active investment management by seasoned fund managers, ensuring a diversified portfolio across different segments of the BFSI sector. This strategy aims to provide potential long-term capital appreciation, making it an attractive option for those seeking exposure to the dynamic financial services industry.
Scheme Asset Allocation
|Instrument||Indicative Allocations (% of total assets)||Risk Profile|
|Equity and equity related securities of companies engaged in banking and financial services sector||Minimum 80% Equity, Maximum 100% Debt||Very High Risk|
|Equity and equity related securities of other companies||0% Equity, Maximum 20% Debt||Very High Risk|
|Debt and Money Market Instruments*||0% Equity, Maximum 20% Debt||Low Risk to Moderate Risk|
|Units issued by REITs & InvITS||0% Equity, Maximum 10% Debt||Very High Risk|
Where will the Scheme invest?
The investment portfolio encompasses a diverse range of financial instruments, including equity and equity-related instruments, equity derivatives linked to stock values or indices, and government securities issued by Central and State Governments. Additionally, the fund may invest in fixed-income securities from domestic government agencies, money market instruments as permitted by SEBI/RBI, and other approved domestic fixed-income securities.
The portfolio also includes units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), along with units of Mutual Fund schemes and overseas funds, securities, and ETFs. This comprehensive approach allows for a well-rounded investment strategy, leveraging various asset classes for potential returns.
Investment Strategies to be Used
The investment manager utilizes a top-down approach coupled with in-house research to identify value and growth stocks. For trading in equities, managers are going to use strategies like arbitrage, reverse arbitrage, and portfolio hedging, while for debt instruments, managers are relying on credit ratings and thorough company analysis.
Who Will Manage the Scheme?
Dhaval Gada, with 13 years of extensive experience, currently serves as the Fund Manager for DSP Asset Managers Private Limited since April 2023. Prior to this role, he held the position of Fund Manager at DSP Investment Managers Private Limited, previously worked as an Analyst at the same firm. His career includes roles such as Research Analyst at Sundaram AMC Pvt Ltd, Senior Manager at Motilal Oswal Securities Ltd, and Manager at Evalueserve.com Pvt Ltd. Armed with a PGDM in Finance from Welingkar Institute of Management, Dhaval Gada is entrusted with managing key funds, including DSP Equity & Bond Fund, DSP Flexi Cap Fund, and DSP Dynamic Asset Allocation Fund, showcasing his expertise in the financial domain.
Jay Kothari, a dedicated fund manager specializing in overseas investments, brings over 18 years of expertise to his role. With a Bachelor’s in Management Studies (BMS) and an MBA in Finance from Mumbai University, he has been a key player in the financial landscape. Currently serving as the Vice President in Equity Investments and a Product Strategist at DSPAM, Kothari previously held a similar role at DSP Investment Managers (DSPIM). As the dedicated fund manager for overseas investments, Kothari manages a portfolio of funds, including DSP Equity Opportunities Fund, DSP Global Allocation Fund, DSP Healthcare Fund, DSP US Flexible Equity Fund, and others. His extensive experience and strategic insights contribute to the success of DSP’s international investment offerings.
Risks Associated with Fund
- Liquidity risks: The fund’s investments may be subject to liquidity constraints due to factors such as low trading volumes, extended settlement periods, or other procedural hurdles. Unforeseen events affecting specific companies or sectors could further impair market liquidity, potentially impacting prices and portfolio rebalancing.
- Sector-specific risks: While investments in mid-cap and small-cap companies offer the potential for higher growth, they also carry greater volatility and market liquidity risks. Investors considering this fund should carefully evaluate their understanding of the dynamics and volatility of these sectors.
- Credit and interest rate risks: The fund’s exposure to debt instruments inherently carries credit risk, which is primarily associated with an issuer’s ability to fulfil its interest and principal obligations. Fluctuations in interest rates can also impact the fund’s value, necessitating close attention from investors.
- Derivatives trading risks: Employing derivatives trading strategies introduces additional risks, including counterparty risk, market liquidity risk, model risk, and basis risk. Investors should be aware of these risks when considering the fund’s investment strategies involving derivatives.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.