DSP Investment Managers launches DSP Nifty Bank ETF; NFO period 26-28 December

DSP Investment Managers announced the launch of DSP Nifty Bank ETF, an open-ended scheme which will track Nifty Bank Index. Financial stocks have the largest representation in Nifty50 and account for 37 per cent according to data source from NSE. HDFC Bank and ICICI Bank are among the top three constituents by weightage.

The New Fund Offer period for DSP Nifty Bank ETF is from December 26, 2022 to December 28, 2022.

 Source: DSP Investment Managers

“This ETF offers investors an option to take a sectoral exposure to the banking sector. This is especially relevant now as banking stocks are available at attractive valuations despite the recent rally in the stock markets,” a company release said.

Nifty Bank Index is diversified with a composition of 78 per cent in private banks and 22 per cent in public banks, the release said. The 12-stock index comprises of liquid and large banking stocks, with no single stock having an exposure of over 33 per cent and the maximum exposure to the top 3 stocks being lesser than or equal to 62 per cent, the release said.

Key takeaways:

1) Historical data since 2000 shows that Nifty Bank Index has outperformed the broad Nifty 50 index in 15 out of 23 years.

2) On a 10-year basis, Nifty Bank Index has outperformed Nifty 50 Index a whopping 98 per cent of times.

"The top 5 banks are also seeing strong credit growth and an improvement in asset quality. Banks have also benefited from an expansion in net interest margins post Covid. Robust credit growth and improvement in operating margins and return on equity for banks are other positives that indicate a healthy outlook for banking as a theme," the release said. 

“The banking sector is expected to see further value unlocking due to the fundamentals factors and that coupled with attractive valuations presents an attractive opportunity for investors. We would advise investors to consider this product with a long-term orientation as evidenced by the long-term performance of the Nifty Bank Index.” says Anil Ghelani, CFA, Head – Passive Investments & Products, DSP Investment Managers.

However, investors should note some risks arising from concentration risk arising from the index having exposure only to 12 stocks in the banking sector and the possibility of higher volatility and drawdown as compared to a diversified equity fund which can result in comparative short-term underperformance.   

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)