 "Banking MFs offer 16% returns over 10-year period")
Mutual fund equity schemes in the banking space were among the best money-making schemes for investors over the past decade.
The average category return of banking equity schemes stands at a negative 9.5 per cent in the past year. This essentially means Rs 100 invested in such schemes a year ago would have a current value of Rs 90.5, making banking-related mutual fund schemes the worst performer in the past year.
However, these schemes have stood strong on a horizon of 10 years. They have provided a handsome annualised rate of return of 16.2 per cent. Annualised means that the investment returns have been compounded. The period saw benchmark indices gaining 9.6 per cent in annualised terms.
Reliance Banking Fund, with an asset size of Rs 2,015 crore, provided an annualised return of 18.21 per cent, beating not only the banking index but also the category average. If an investor had been investing in it through a systematic investment plan (SIP) with a Rs 1,000 monthly installment, the total invested amount of Rs 1,20,000 thus far would have become nearly Rs 2,74,000.
The average category return of banking equity schemes stands at a negative 9.5 per cent in the past year. This essentially means Rs 100 invested in such schemes a year ago would have a current value of Rs 90.5, making banking-related mutual fund schemes the worst performer in the past year.
However, these schemes have stood strong on a horizon of 10 years. They have provided a handsome annualised rate of return of 16.2 per cent. Annualised means that the investment returns have been compounded. The period saw benchmark indices gaining 9.6 per cent in annualised terms.
Reliance Banking Fund, with an asset size of Rs 2,015 crore, provided an annualised return of 18.21 per cent, beating not only the banking index but also the category average. If an investor had been investing in it through a systematic investment plan (SIP) with a Rs 1,000 monthly installment, the total invested amount of Rs 1,20,000 thus far would have become nearly Rs 2,74,000.
UTI Banking Sector Fund, a Rs 402 crore scheme, delivered an annualised return of 16.32 per cent during this period, turning a Rs 1,000 SIP investment totalling Rs 1.2 lakh into Rs 2.32 lakh.
The majority of banking sector mutual funds were hit in recent years as several stocks lost ground. Initially, the public sector banks cracked and last year some private lenders like Axis Bank and ICICI Bank joined the trend.
State Bank of India (SBI) declined to a low of Rs 148 from a high of Rs 340, Bank of Baroda dipped from Rs 240 to Rs 120, and Punjab National Bank tumbled from Rs 200 to Rs 80. Axis Bank broke from a high of Rs 650 to Rs 370 and ICICI Bank slipped from Rs 400 to Rs 180.
Investment experts say sectoral funds should be preferred by sophisticated investors who have a high risk-taking appetite, given that sectoral funds take time to perform.
The next best performers in the past decade were FMCG funds and pharma funds with annualised returns of 16.63 per cent and 16.79 per cent, respectively.
All other categories fared worse. The average category return from large cap equity funds was less than 10 per cent while multi-cap, mid-cap and small-cap funds offered annualised returns of 11.48 per cent, 12.74 per cent and 13.08 per cent, respectively.
