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DSP Investment Managers launches DSP Nifty Bank ETF

DSP Investment Managers announced the launch of DSP Nifty Bank ETF, an open-ended scheme replicating/tracking the Nifty Bank Index. 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.

Banking stocks currently contribute the highest share of profits among all sectors in the major indices. 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.

Nifty Bank Index is diversified with a composition of 78% in private banks and 22% in public banks. Nifty Bank Index is composed of a maximum of 12 liquid and large banking stocks, with no single stock having an exposure of over 33% and the maximum exposure to the top 3 stocks being lesser than or equal to 62%. Historical data since 2000 shows that Nifty Bank Index has outperformed the broad Nifty 50 index in 15 out of 23 years. On a 10-year basis, Nifty Bank Index has outperformed Nifty 50 Index a whopping 98% of times. 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.   

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

“A banking system functions as the heart and lifeblood of any functioning economy. A robust banking system is the key to economic growth and development, especially for a fast-growing country like India. 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.

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