Sectoral Banking Mutual Funds

Sectoral - banking funds are equity funds that invest a minimum of 80% of funds in sectors related to finance, banking and insurance. These funds specifically target banks, financial institutions, insurance companies, and other related businesses.

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Best Sectoral Banking Mutual Funds to Invest

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ICICI Prudential Asset Management Company LimitedHDFC Asset Management Co LtdSBI Funds Management LtdKotak Mahindra Asset Management Co LtdNippon Life India Asset Management LtdAditya Birla Sun Life AMC LtdAxis Asset Management Company LimitedUTI Asset Management Co LtdMirae Asset Investment Managers (India) Private LimitedDSP Asset Managers Private LimitedTata Asset Management LimitedBandhan Asset Management Company LimitedHSBC Asset Management(India)Private LtdDSP Investment Managers Private LimitedIDFC Asset Management Company LimitedFranklin Templeton Asst Mgmt(IND)Pvt LtdCanara Robeco Asset Management Co. Ltd.Edelweiss Asset Management LimitedQuant Money Managers LimitedInvesco Asset Management (India) Private LtdPPFAS Asset Management Pvt. LtdMirae Asset Mutual FundMotilal Oswal Asset Management Company Limited - Portfolio ManagersSundaram Asset Management Company LtdMirae Asset Global Inv (India) Pvt. LtdBaroda BNP Paribas Asset Management India Pvt. Ltd.Mahindra Manulife Investment Management Pvt. Ltd.LIC Mutual Fund Asset Management LimitedJM Financial Asset Management LimitedPGIM India Asset Management Private LimitedDaiwa Asset Mgmt. (India) Pvt. Ltd.Fund PineBridge Mutual FundUnion Asset Management Co. Pvt. Ltd.Baroda Asset Management India LimitedBajaj Finserv Asset Management LimitedPrincipal Asset Management Private LimitedWhiteOak Capital Asset Management Limited360 ONE Asset Management LimitedJPMorgan Asset Management India Pvt. LtdEdelweiss Mutual FundBank of India Investment Managers Private LimitedITI Asset Management LimitedNavi AMC LimitedNJ Asset Management Private LimitedICICI Prudential Asset Mgmt.Company LimitedFranklin Templeton Asset ManagementIDBI Asset Management LimitedQuantum Asset Management Co Pvt. Ltd.Samco Asset Management Pvt LtdHelios Capital Asset Management (India) Private LimitedGroww Asset Management Ltd.Trust Asset Management Private LimitedTaurus Asset Management Company LimitedShriram Asset Management Co LtdOld Bridge Asset Management Private LimitedZerodha Asset Management Private LimitedING Investment Mgnt (India) Private Ltd.Baroda BNP Paribas Mutual Fund
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How does Sectoral Banking mutual funds work?

Sectoral banking funds work by pooling money from individual investors and investing it primarily in stocks of companies operating within the banking and financial services sector. Here's how they typically operate:

  • Fund Formation

    A mutual fund company(AMC) establishes a sectoral banking fund with a specific investment objective focused on the banking and financial services sector. The fund's investment objective, strategy, and guidelines are outlined in its prospectus.

  • Fund Manager Selection

    The mutual fund company appoints a fund manager or a team of managers responsible for making investment decisions for the fund. The fund manager(s) analyze market trends, economic conditions, and sector-specific factors to identify potential investment opportunities within the banking sector.

  • Portfolio Construction

    Based on the fund's investment objectives, the fund manager constructs a portfolio by selecting a diversified mix of stocks of banking and financial services companies. These companies may include commercial banks, investment banks, insurance companies, non-banking financial institutions, and other related businesses.

  • Active Management

    Sectoral banking funds are typically actively managed, meaning the fund manager(s) actively monitor the portfolio, make investment decisions, and adjust holdings based on changing market conditions and investment opportunities. The goal is to outperform the benchmark index or achieve the fund's investment objectives.

Advantages of investing in Sectoral Banking mutual funds

Investing in sectoral banking mutual funds offers several potential advantages:

  • Focused Exposure

    Sectoral banking mutual funds provide focused exposure to the banking and financial services sector, allowing investors to specifically target companies operating within this industry. This focused exposure can be beneficial for investors who want to capitalize on the growth potential of the banking sector.

  • Diversification

    While sectoral banking funds concentrate on the banking sector, they often invest in a diversified portfolio of banking and financial services companies. This diversification helps spread risk across different companies within the sector, reducing the impact of negative events affecting any single company.

  • Aligned with Economic Growth

    The banking sector plays a vital role in supporting economic growth by providing credit, facilitating transactions, and allocating capital to businesses and consumers. Investing in sectoral banking mutual funds allows investors to participate in the growth of the banking industry, which is closely linked to broader economic trends.

Limitations of investing in sectoral banking funds

Investing in sectoral banking funds carries certain limitations and risks that investors should consider:

  • Sector Concentration Risk

    Sectoral banking funds are highly concentrated in the banking and financial services sector. As a result, they are susceptible to sector-specific risks, such as regulatory changes, interest rate fluctuations, credit risk, and economic downturns. If the banking sector underperforms or faces challenges, it can significantly impact the performance of the fund.

  • Market Volatility

    The banking sector can be highly volatile, influenced by factors such as economic conditions, interest rate movements, geopolitical events, and regulatory changes. Sectoral banking funds may experience heightened volatility compared to more diversified funds, exposing investors to greater fluctuations in the value of their investments.

  • Regulatory and Legislative Risks

    The banking industry is subject to extensive regulatory oversight and legislative changes, which can impact the operating environment, profitability, and growth prospects of banking companies. Changes in regulations, capital requirements, or government policies can affect the performance of sectoral banking funds and individual holdings within the portfolio.

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