Summary

* An exit load of 1.0% will be levied if redeemed/switched out before 1 year from the date of allotment of units. After that exit load is nil.

Investment Objective*

The primary investment objective of the scheme is to "generate capital appreciation through a portfolio that invests predominantly in equity and equity related instruments of Banking, Financial and Non-Banking Financial Companies that form a part of the BFSI Sector. However, there is no assurance or guarantee that the objectives of the scheme will be realized and the scheme does not assure or guarantee any returns."

*Source: Scheme Information Document

Is this fund for you?

Taurus Banking & Financial Services Fund (TBFSF) is a sectoral fund from the stable of Taurus Mutual Fund, which will focus on citing opportunities available within the Banking and Financial Services (BFSI) sector, and thereby link its performance against the BSE Bankex.

TBFSF will be actively managed fund, intended to optimize returns by investing into various equity and equity related instruments within BFSI sector, including derivative contracts (both futures & options) – upto 25% of the net assets, subject to regulatory approvals. Hence, in its motive of optimising returns, TBFSF will expose its investors to high risk. Moreover, by holding a portfolio, comprising of the stocks from the BSE Bankex, TBFSF will hold a concentrated portfolio which will again make it a risky investment proposition. But as an investment strategy, since the fund will be holding stocks for a period of 3 to 5 years, one can expect a low portfolio churning.

Portfolio & Investment Strategy

TBFSF while citing opportunities within the BFSI sector will follow a top-down approach of investing and manage the fund actively. The Key factors for its investment strategy will be:

·         Identifying attractive investment opportunities

·         Emphasis on stock selection

·         Investing across market capitalisations

·         Selecting stocks with the investment horizon of three to five years

While investing in equity and equity related instruments within the BFSI sector, TBFSF will not refrain from investing in IPOs, private placements, rights offer, foreign equity and equity related securities (including ADRs / GDRs issued by Indian or Foreign companies belonging to BFSI sector) and derivative instruments (both futures & options – put and call).

Moreover adopting a defensive stance, TBFSF may also take exposure in debt & money market instruments upto 20% of its net assets. Also, the TBFSF will also have the flexibility to take cash calls, if market conditions warrant such a stance in the view of the fund manager.

Thus given the above, the asset allocation which will be followed by the fund will be as under:

(Source: Scheme Information Document)

Fund Manager Profile

Mr. Sadanand Shetty- Fund Manager – Equity, holds a Masters' degree in Commerce (Banking & Finance), and has to his credit a PGDFA from Xavier's Institute of Management, Mumbai. He holds over 18 years of work experience in the field of equity research and fund management. Prior to joining Taurus Mutual Fund, he has worked with Kotak Securities, SocGen, Newscorp, Principal Capital Markets Ltd. and Capital Markets Publishers Pvt. Ltd.

Fund Outlook

The launch of TBFSF has come at the time when interest rate sensitive sectors are likely to perform better, as the RBI has started reducing policy rates. Moreover, the present corrective phase of the Indian equity markets would also enable the fund manager to cite attractive investment opportunities within the BFSI sector. The banking sector, so far, has reported a strong set of numbers for Q4, FY 2011-12. Two private sector majors, ICICI Bank & HDFC bank have been able to register robust growth. Outlook for credit expansion also appears optimistic, and the following macro-economic factors (amongst others) may be encouraging for investing in BFSI sector:

·         Rising trend in income, savings and investments

·         Emerging larger share for private sector participants in financial services pie

·         Likelihood of a benign interest rate environment once the current turmoil is past

·         Imminent listing of insurance and asset management companies

·         Quality regulation for the BFSI sector

But massive loans towards risky portfolios (such as aviation, construction, etc.) tend to have a detrimental impact on asset quality of the companies within the BFSI sector. Also, aggressive Government borrowing program may increase the cost of capital for banks and NBFC's which may, in turn, affect their profitability. Furthermore, S&P, the leading rating agency, has recently cut the rating outlook of SBI, ICICI Bank and HDFC Bank which may to an extent affect the cost of borrowing for banks.

Thus, TBFSF while availing opportunities within the BFSI sector, will have its fortune closely linked to performance of the said sector