Motilal Oswal Asset Management Company has announced the launch of Motilal Oswal S&P BSE Financials ex-Bank 30 Index Fund. This is the first of its kind passive fund that aims to provide exposure to the financial services sector, excluding banks, the fund house said in a press statement.
This passive fund is an open-ended scheme replicating the total returns of S&P BSE Financials ex-Bank 30 Total Return Index. The new fund offer (NFO) opens on July 14, 2022 and closes on July 22, 2022.
During the NFO, investors can start with a minimum investment of Rs 500, and thereafter, in multiples of Re. 1 in both lump as well as systematic investment plans (SIPs). Investors can purchase or redeem units of the scheme through financial advisors or by logging in to the website www.motilaloswalmf.com .
The top-30 non-banking financial stocks from the S&P BSE 250 Large Midcap Total Return Index will be included in the index, with a maximum stock weight of 15 per cent. Every June and December, the index will be rebalanced on a semi-annual basis. At present, the index includes stocks of housing finance companies (HFCs), non-banking financial companies (NBFCs), exchanges, asset management companies (AMCs), insurance companies, card payment companies, and fintech, among others.
Housing Development Finance Corp, Bajaj Finance Ltd, Bajaj Finserv Ltd, HDFC Life Insurance Company Ltd, and SBI Life Insurance Company Ltd are among the index constituents as of June 2022. The 10 hot-seller stocks account for nearly 72 per cent of the index’s weight.
NBFCs dominate the sector in terms of weight, accounting for close to 28 per cent, followed by life insurance and HFCs at 21 and 18 per cent, respectively. The index is heavily weighted in favour of large-cap corporations, which account for 75 per cent of the weight, with mid-cap companies making up the remaining 20 per cent.
On a total returns basis, the S&P BSE Financial’s Ex-Bank 30 Index has outperformed the S&P BSE 250 Large Midcap Index over the last 15 years. The index has noted a compounded annualised growth rate (CAGR) of 15.3 per cent vs S&P BSE 250 Large Midcap Index of 14 per cent, thus outperforming the broad market by more than 1 per cent. It has also been observed that the index tends to do well during a bull and recovery cycle.
It should be noted that except for banks, the rest of the industries that make up the banking and financial services industries (BFSI) sector in India are highly underpenetrated when compared to the rest of the world. These financial services companies operate in the business of consumer credit (personal loans, credit cards, home loans), insurance (life and general), and capital market (exchanges, credit rating agencies). With rapid urbanisation and rising income levels, more people are expected to tap into these financial services, leading to the growth of these companies.
Navin Agarwal, managing director and CEO, Motilal Oswal AMC, said: “With an objective to bring new investment opportunities through innovative products, we built a new concept to leverage wealth-creation opportunities beyond just banks within the financial services sector. With India’s urban population set to grow to 50 per cent from the current 35 per cent, the migration will trigger transfer of money from old assets (term deposits) to new assets (capital markets and insurance), and lead to a rise in the consumption economy, i.e., high demand for credit. As a result of this, the financial service sector will stand to benefit.”
Pratik Oswal, head of passive funds, Motilal Oswal AMC, said: “Motilal Oswal S&P BSE Financial Services ex-Bank 30 Index Fund offers investors the first of its kind opportunity to invest in the non-banking financial sector. The fund will invest in new-age financial companies from HFCs, NBFCs, exchanges, AMCs, insurance, card payment, and fintech etc. The fund will enable Indian investors to capitalise on the growth of financialisation of assets, shifting consumer mind set from saving to investing, and benefit from the companies that will gain from the consumption theme.”