Invest in Banking ETFs

Invest in Banking ETFs Banking sector is considered to be the barometer of economy and has the highest weightage in the Sensex. Hence it generally outperforms whenever the economy is improving and the equity market is in an upturn. The government's plan to bring down the stake in PSU banks to 52%, restructuring windows issued by the RBI for existing and new infra loans, improving growth and incremental profits, capital adequacy at comfortable position for private banks etc. can help the banking stocks perform better at the current scenario.

We, therefore, believe as the economy revives much of the impediments faced by the banking sector slower credit pick-up, deteriorating asset quality and a fall in profitability may all come to an end. In the past, the banking sector has outperformed the BSE Sensex in a growing market. We believe the same may happen over the next two to three years. Since these are sectorial funds, investors can, therefore, consider allocation of some part of their overall equity portfolio to these funds.

Some of the better performing and our research recommended banking funds are:

Fund name 6 M 1 Yr 3 Yrs 5 Yrs Exit Load (%) ICICI Prudential Banking & Financial Services Fund 22.20 86.80 31.70 21.60 (Period up to 12 Months) 1 Reliance Banking Fund 22.80 85.50 25.70 20.20 (Period up to 12 Months) 1 UTI Banking Sector Fund 19.80 73.70 20.50 15.80 (Period up to 548 days) 1