A healthy financial sector plays an important role in the economic growth and keeps the wheels of the economy running. The banking and financial services sector has grown at a faster pace than the GDP. After the severe impact of the second wave of COVID 19 pandemic, the economic growth is expected to bounce back significantly aided by growth in the financial services (FS) sector.
This sector has sub-segments with lower penetration that expectedly have a better growth potential. With the improvement in asset quality of banks and revival of corporate sectors, there is a potential to improve the profitability of the financial services sector.
Historically, the money invested in financial services sector has seen optimal growth. As India progresses from being a developing economy to a developed one, the financial services sector will enhance too.
The benchmark index that tracks the leading companies under the financial services sector is Nifty Financial Services Index. It is designed to reflect the behavior and performance of the large companies in the FS sector.
The financial services is a fairly diversified sector, which is undergoing rapid expansion due to digitization and emergence of new products and services. On this backdrop, Mirae Asset Mutual Fund has launched Mirae Asset Nifty Financial Services ETF (MANFS-ETF). It is an open-ended scheme replicating/tracking Nifty Financial Services Total Return Index.
On the launch of this fund, Mr Swarup Mohanty CEO of Mirae Asset Investment Managers (India) Pvt. Ltd. said, “Mirae Asset is striving to create a strong suite of passive products that will provide investors the option to take underlying index exposure in various segments of the market at low cost. In this effort, we are now launching Mirae Asset Nifty Financial Services ETF.
While the financial services sector has grown at a great pace and financial inclusion across board has improved, we still have a long way to go to reach even global averages. With the advent of new products and services backed by innovative technology, the scope of financial services is tremendous in coming years, which makes it a very compelling sector to take exposure in.”
Table 1: Details of Mirae Asset Nifty Financial Services ETF
| Type | An open-ended scheme replicating/tracking Nifty Financial Services Total Return Index. | Category | Exchange Traded Fund (ETF) |
| Investment Objective | The investment objective of the scheme is to generate returns, before expenses, that are commensurate with the performance of the Nifty Financial Services Total Return Index, subject to tracking error. The Scheme does not guarantee or assure any returns. | ||
| Min. Investment | Rs 5,000 and in multiples of Re 1 thereafter | Face Value | Rs 10/- per unit |
| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager | Ms Ekta Gala | Benchmark Index | Nifty Financial Services TRI (Total Return Index) |
| Issue Opens: | July 22, 2021 | Issue Closes: | July 29, 2021 |
(Source: Scheme Information Document)
The investment strategy of Mirae Asset Nifty Financial Services ETF will be as follows:
Mirae Asset Nifty Financial Services ETF will predominantly invest in securities consisting of the Nifty Financial Services Index and it will endeavour to track the index to achieve the investment objective.
The investment strategy of this scheme will be to invest in a basket of securities forming part of Nifty Financial Services Index in similar weight proportion. This scheme will be managed passively by the fund manager with an aim to track the performance of the underlying index and generate parallel returns.
The scheme will endeavour to reduce the tracking errors to the least possible through regular rebalancing of the portfolio, considering the change in weights of stocks in the Index as well as the incremental collections/redemptions in the scheme. A part of the fund’s portfolio may be invested in debt and money market instruments to meet the liquidity requirements.
About the benchmark
The Nifty Financial Services Index is designed to reflect the behaviour and performance of the Indian financial market, which includes banks, financial institutions, housing finance, insurance companies and other financial services companies. The Nifty Finance Index comprises of 20 stocks that are listed on the National Stock Exchange (NSE).
Nifty Financial Services Index is computed using free float market capitalization method, wherein the level of the index reflects the total free-float market value of all stocks in the index relative to particular base market capitalization value.
The following is the list of constituents and sector under the index by their weightage as of June 30, 2021:
(Source: Mirae Asset Nifty Financial Services ETF PPT)
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation of Mirae Asset Nifty Financial Services ETF
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Securities included in the Nifty Financial Services Index | 95 | 100 | High |
| Money market instruments / debt securities, Instruments and/or units of debt/liquid schemes of domestic Mutual Funds | 0 | 5 | Low to Medium |
(Source: Scheme Information Document)
Who will manage Mirae Asset Nifty Financial Services ETF?
Ms Ekta Gala will be the dedicated fund manager for this scheme.
Ms Ekta Gala is a Fund Manager – ETFs at Mirae Asset Investment Managers (India) and she has over 4 years of experience in financial services industry. Her primary responsibility includes dealer & fund management. Prior to this, she was associated with ICICI Prudential AMC as ETF dealer.
Ms Ekta’s qualification includes, Inter CA (IPCC) and B.com. The other schemes she currently manages are; Mirae Asset NIFTY 50 ETF, Mirae Asset NIFTY Next 50 ETF, Mirae Asset ESG Sector Leader ETF, Mirae Asset ESG Sector Leader Fund of Fund and Mirae Asset NYSE FANG+ ETF Fund of Fund.
Fund Outlook – Mirae Asset Nifty Financial Services ETF
Mirae Asset Nifty Financial Services ETF will seek to invest in securities comprising of Nifty Financial Services Index. It offers exposure to 20 companies stocks that represents various segments of financial services sector.
The underlying index encompasses not only banks but also other segments such as NBFC, insurance, capital markets etc., which are currently under penetrated. Low penetration across sub-segments provides more room for growth.
Being a sectoral ETF, it is a relatively low cost option to invest in the financial services sector. It offers investors an opportunity to participate in the sector, which is essential for the overall growth of the economy.
This scheme is a way for investors to take a tactical position across the BFSI sector. It not only helps to diversify risk but also generate an opportunity for alpha, as such themes gain prominence. It will be a passively managed scheme eliminating the risk of stock selection.
However, the pace of economic recovery will play a crucial role in the overall performance of this index and the performance of this scheme will particularly depend on the underlying index. Such sector focused ETFs follow a concentrated approach; therefore, these are high-risk investment propositions.
This scheme is suitable only for aggressive investors who are well versed with the sector and can take timely investment calls. You must ensure having a high-risk appetite, a long investment horizon of at least 5-7 years and align your investment objectives with the fund.
This article first appeared on PersonalFN here
