Mirae Asset Banking and Financial sevices Fund

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Banking & Financial Services Funds are equity mutual fund schemes which invest at least 80% of their assets in stocks of companies that benefit from the growth in the banking and financial sector. These stocks may include Banks, Non-Banking Finance Companies (NBFCs), Housing Finance Companies (HFCs), Broking and Securities, Stock Exchanges, Depositories, Asset Management Companies (AMCs), Insurance Companies, Credit Card and payment gateway, Digital Financial Institutes, Investment companies and rating agencies etc.

  • Equity and equity related instruments of companies in the Banking and Financial Services Sector in India (minimum 80%)
  • Other equities and equity related Instruments (upto 20%)
  • Debt and Money Market Instruments including schemes of Mutual Fund (upto 20%)
  • Units issued by REIT/InVITs (upto 10%)

The AMCs are required to disclose full portfolios of each scheme on a monthly basis on their website and also on their monthly fact sheet. The scheme portfolio shows investment made in each security i.e. equity, equity related instruments and other instruments as per the scheme mandate, along with the respective quantities, market value and % weightage to the NAV.

  • The fund manager broadly analyses the industry trends and business cycles in companies that may benefit from the growth in the Banking and Financial services sector that includes but not limited to Banks, NBFCs, HFCs, MFCs, Broking and securities, Stock exchanges, depositories and related infrastructure providers, Wealth management or various kinds of asset management, Insurance, currency and forex, Credit cards and payment gateways or such infrastructure providers, digital financial institutes, rating agencies and investment companies.
  • The fund has the flexibility to invest across market capitalization in portfolio companies within this theme.
  • The Fund may also invest upto 20% of the net assets of the Scheme in equities and equity related securities of companies other than in Banking and Financial services sector .
  • The focus would be to build a portfolio of strong growth companies, reflecting Mirae Assets’ most attractive investment ideas at all points of time. The universe of stocks will comprise majorly of companies having robust business models, enjoying sustainable competitive advantages as compared to their competitors and have high return ratios. The fund manager can also have the flexibility to follow a focused approach on the investments, but he will try to avoid liquidity risk.
  • The Fund Managers will monitor the trading volumes in a particular stock before investment to avoid liquidity risk.
  • The Scheme may take derivatives position based on the opportunities available subject to the guidelines issued by SEBI from time to time and in line with the overall investment objective of the Scheme. These may be taken to hedge the portfolio, rebalance the same or to undertake any other strategy as permitted under the SEBI Regulations.
  • The Scheme may also invest in debt securities and money market instruments.

The investment objective of the scheme is to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in banking and financial services sector. The Scheme does not guarantee or assure any returns

Suggested investment tenure is at least 5 years.

The risk profile of Mirae Asset Banking & Financial Services Fund is ‘High’. Investors should understand that their principal will be at high risk.

NIFTY Financial Services TRI Index (Total Return Index) is the Benchmark for this fund.

  • Investors who primarily aim for capital appreciation and are ready to take high risk.
  • Investors who want some exposure (5-10%) to sectoral funds with an aim to boost portfolio returns.
  • Investors with long investment horizons, at least 5 years or longer.
  • Investors with high risk appetites.
  • Investors who understand that sectoral funds are one of the most risky fund categories

The Scheme has Regular Plan and Direct Plan with a common portfolio and separate NAVs. Investors should indicate the Plan for which the subscription is made by indicating the choice in the application form. Each of the above Regular and Direct Plan under the scheme will have the following Options - 1) Growth Option and 2) Dividend Option. Under the dividend Option, there will be 2 sub options -: 1) Dividend Payout and 2) Dividend Reinvestment.

Total Expense ratio or TER represents the annual fund operating expenses of a scheme, expressed as a percentage (%) of the fund’s daily net assets. All expenses of an AMC must be managed within the maximum limits of TER as per SEBI Mutual Fund Regulations.

As per the current regulations, the TER allowed is 2.25% for the first Rs.500 Crores, 2.00% for the next Rs.250Crores, 1.75% for the next Rs.1250Crores, 1.60% for the next Rs 3000 Crores and 1.50% for next Rs 5,000 Crores.

On the next Rs. 40,000 Crores of the daily net assets, TER reduction of 0.05% for every increase of Rs 5,000 Crores of daily net assets or part thereof, on the next Rs. 40,000 Crores of the daily net assets. Balance of assets, the TER would be 1.05%.

For example - An expense ratio of 2% per annum means that, each year 2% of the schemes’ total assets (AUM) can be used to cover operating expenses like administration, management, advertising and brokerage payment etc.

There may be changes from time to time in a mutual fund schemes. In such cases, the AMC is required to inform about the changes to all their unit holders through email, direct communication and through newspaper advertisement. Apart from the above, the Scheme Information Document (SID) and Key Information Memorandum (KIM) are also required to be updated.

With effect from this financial year (2020-21), dividends are taxable in the hands of the investor. The dividend has to be added to the total income of the investor and taxed at the income tax rate applicable to the investor. TDS at the rate of 10% will be done by AMC, if the dividend from equity funds exceeds Rs 5,000 in a financial year.

Capital gains arising out of long term investments (held for more than 12 months) are tax free upto Rs 1 Lakh in a financial year. Long term capital gain over Rs 1 Lakh in a financial year is taxed at 10%. Short term (investments held for less than 12 months) capital gains are taxed at 15%.

  • Sectoral allocations have the potential of creating alphas in your portfolio over sufficiently long investment tenures.
  • The Government has taken a number of steps to reform and strengthen the banking sector. The Pradhan Mantri Jan Dhan Yojana aimed at providing financial inclusion to all Indians has brought 41 crore Indians under the banking system. The Government has made a major thrust for digitization of payments through the Jan Dhan, Aadhaar and Mobile (JAM) trinity. Unified Payments Interface (UPI) recorded 1.25 billion transactions in March 2020, valued at Rs 2.06 lakh Crores. This may immensely benefit this sector. Source: financialservices.gov.in and Economic Times
  • Investors may get the advantage of investing in banking and financial services sector stocks through a single portfolio.
  • The weight of Banking & Financial Services in the Indian stock market has been going up steadily over the last decade and it is now the largest sector in the key equity market benchmarks such as Nifty 50.
  • There are 5 banking and financial services companies in the Top 10 companies by market cap in Nifty. https://www.moneycontrol.com/stocks/marketinfo/marketcap/nse/index.html
  • Nifty Financial Services TRI has outperformed the broader market (Nifty 50 TRI) in the last, 3, 5 and 10 years period ( as on 18th November 2020). https://www.advisorkhoj.com/mutual-funds-research/mutual-fund-benchmark-monitor
  • Can help meet long term financial goals provided the investor can tolerate high risk while aiming to creating wealth during the long term investment journey.

The fund’s returns are subject to market risk. The returns of the funds can be volatile and even negative depending on market conditions. Past performance of the fund may or may not be sustained in the future.

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