Banking funds offer attractive entry levels

Investors looking to make a broad-based thematic bet in a market that is trading at all-time highs can consider a banking fund to benefit from attractive valuations while diversifying their portfolio.

Recent underperformance of the Nifty Financial Services Index, bank non-performing assets at decadal lows, lower valuations and strong growth prospects for the Indian economy, provide a good entry point, believe fund managers. Investors can make a lump sum investment and allocate 5-10% of their portfolio to such funds, fund managers say.

Fund managers point out that the Nifty Financial Services Index has lagged the broader Nifty 50 index over the last three years. The Nifty Financial Services Index gained 17.19% and 43.24% in the last one and three years, respectively, underperforming the Nifty 50's gain of 25.26% and 54.19%.

Data from Whiteoak Capital Mutual fund show for a 10-year investment, historically Nifty Financial Services Index's Total Return Index (TRI) outperformed the broader market 98.7% of the times for lump sum investments, making valuations attractive.