Tipping point: Should you exit banking funds when the sector is down?

Even though market sentiment has turned against the banking sector currently, its long-term prospects remain strong

Banking and financial services sector funds have taken a big knock, declining by over 13 per cent on an average over the past month. This is primarily due to the events at Yes Bank, which has been placed under moratorium by the Reserve Bank of India (RBI). Moreover, this is a sector that moves in line with the economy. When the economy is doing well, there is greater demand for credit and hence the banking sector tends to do well. Even though market sentiment has turned against the sector currently, its long-term prospects remain strong. If you hold a fund from this category, do not exit it.