“This ETF offers investors an option to take a sectoral exposure to the banking sector. This is especially relevant now as banking stocks are available at attractive valuations despite the recent rally in the stock markets,” DSP Investment Managers said in a release.
The Nifty Bank Index is composed of 78% private banks and 22% public banks. The index has outperformed the benchmark Nifty 50 in 15 out of 23 years. On a 10-year basis, Nifty Bank Index has outperformed Nifty 50 98% of times.
“However, investors should note some risks arising from concentration risk arising from the index having exposure only to 12 stocks in the banking sector and the possibility of higher volatility and drawdown as compared to a diversified equity fund which can result in comparative short-term underperformance,” DSP Investment Managers said.
“The banking sector is expected to see further value unlocking due to the fundamentals factors and that coupled with attractive valuations presents an attractive opportunity for investors. We would advise investors to consider this product with a long-term orientation as evidenced by the long-term performance of the Nifty Bank Index.” said Anil Ghelani, Head – Passive Investments & Products, DSP Investment Managers.
Banking funds have delivered good returns this year, with passively managed funds leading the charts with double-digit returns on the back of rally in PSUs.
“Banking stocks currently contribute the highest share of profits among all sectors in the major indices. The top 5 banks are also seeing strong credit growth and an improvement in asset quality. Banks have also benefited from an expansion in net interest margins post Covid. Robust credit growth and improvement in operating margins and return on equity for banks are other positives that indicate a healthy outlook for banking as a theme,” the release said.