Mutual Fund NFO: MF scheme to allow exposure to financial services sector excluding banks

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If you are looking to take exposure to the stocks of financial sector companies but without any allocation into bank stocks, here’s a mutual fund scheme to do so. Motilal Oswal Mutual Fund has announced the launch of Motilal Oswal S&P BSE Financials ex Bank 30 Index Fund. It is an open-ended scheme replicating/tracking the total returns of S&P BSE Financials ex Bank 30 Total Return Index and thereby qualifies as a passive fund.

The NFO opens on 14th July 2022 and closes on 22ndJuly 2022. During NFO investors can invest a minimum Rs. 500, while on an ongoing basis, one can invest a lump sum or start SIP with a minimum of Rs 500. The fund will be the first of its kind passive fund that aims to provide exposure to the financial services sector, excluding banks. The index will include top 30 non-banking financial stocks from S&P BSE 250 Large Midcap Total Return Index with a maximum stock weight capped at 15%.

The index will be rebalanced semi-annually in June and December. Currently, the index includes stocks of Housing finance companies, NBFCs, Exchanges, Asset Management Companies, Insurance, Card Payment & Fintech etc.

As of June 2022, the index constituents features names such as Housing Development Finance Corp, Bajaj Finance Ltd, Bajaj Finserv Ltd, HDFC Life Insurance Company Ltd, SBI Life Insurance Company Ltd., Etc.

The top 10 stocks constitute nearly 72% weight in the index. In terms of industry breakup NBFCs account for the majority with weight close to 28%, followed by Life Insurance at 21% and Housing Finance companies accounting for 18%. The index is largely skewed towards large cap companies accounting for 75% of the weight, while mid cap companies account for the rest.

S&P BSE Financials Ex-Bank 30 Index has outperformed the S&P BSE 250 Large MidCap index over the last 15 years, on a total returns basis. The index has noted a CAGR of 15.3% vs S&P BSE 250 Large MidCap Index 14%, outperforming the broad market by more than 1%. It has also been observed that the index tends to do well during a bull and recovery cycle.

In India, except banks, the rest of the industries within the financial services sectors are highly under-penetrated when compared globally. These financial services companies operate in the business of Consumer Credit (Personal loans, Credit cards, Home loans), Insurance (Life & General) and Capital market (Exchanges, Credit rating agencies). With rapid urbanization & rising income levels, more people are expected to tap into these financial services, leading to the growth of these companies.

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