A Focused Approach to India’s Private Banking Sector.
DSP Mutual Fund today announced the launch of the DSP Nifty Private Bank Index Fund, an open-ended scheme replicating/tracking the Nifty Private Bank Index aiming to provide investors with a focused approach to investing in the private banking sector.
Investors who are bullish on the banking sector can invest in this fund, whose concentrated approach gets them exposure to the four largest private banks which comprise approximately 80% of the index#. DSP believes that the concentration of larger banks within the Nifty Private Bank Index can be an advantage. Customers tend to trust & prefer larger banks more than other smaller peers. This facilitates higher credit growth, better access to capital and economies of scale – thereby helping these banks sustain and grow further.
The market share of Indian private banks has also doubled in the last two decades*. These banks have also demonstrated strong balance sheets and profitability since 2001**. However, the Private Bank Index has significantly underperformed over the last few years compared to broader Nifty 50 and its current valuations are also below the 10 year average^. This would make the sector one of the pockets that are relatively better placed for a turnaround.
“We believe the concentration of larger banks within the Nifty Private Bank Index can be an advantage, mirroring global trends where leading banks tend to demonstrate sustainable growth due to customer trust, access to capital, and economies of scale. This fund offers investors a streamlined approach to participate in the potential of India’s private banking sector,” said Anil Ghelani, CFA, Head of Passive Investments & Products at DSP Mutual Fund.
“The DSP Nifty Private Bank Index Fund presents a tax-efficient way to access the private banking sector unlike investing directly in these stocks, as owning through a mutual fund does not incur capital gains tax while rebalancing between them or on receipt of dividends. Furthermore, current valuations of several index constituents are below their historical averages, potentially offering investors an attractive entry point,” said Diipesh Shah, Fund Manager at DSP Mutual Fund.
The New Fund Offer (NFO) for the DSP Nifty Private Bank Index Fund will be from February 14 to February 28, 2025. Investors can choose between lump-sum investments or systematic investment plans (SIPs) to align with their financial goals.