Fund of Fortnight

Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.[EasyDNNnews:PaidContentStart]

Reason for recommendation
The world is currently grappling with a tariff war, leading to significant uncertainty for globally exposed companies. In such times, it makes sense to shift focus towards domestically driven sectors. One such promising area is the banking and financial services space. That's why our pick for this edition of MF Select is Tata Banking and Financial Services Fund, a sectoral mutual fund focused specifically on the banking and financial services sector in India.

The Fund has consistently outperformed the category average across most time periods, showcasing its ability to generate alpha. Over the past month, the fund delivered a return of 6.33 per cent, comfortably beating the category average of 4.89 per cent. The 6-month return is -1.53 per cent, which, although negative, still outperforms the category average of -2.95 per cent. Over longer durations, the fund has shown resilience and growth, the 3-year period, the fund posted 18.58 per cent, ahead of the average 16.97 per cent, and in the 7-year timeframe, it generated 14.33 per cent versus 12.96 per cent.

When evaluating risk and return parameters, the Fund shines with a well-balanced risk-reward profile. It is worth noting that the fund's Sharpe Ratio (0.86) is among the best, and its Sortino Ratio of 2.45 demonstrates superior downside protection. These metrics point towards a favourable trade-off between risk and reward for disciplined investors.

At the company level, the fund's portfolio is anchored by blue-chip banking names. HDFC Bank commands the largest allocation at 22.96 per cent, reflecting strong conviction. This is followed by Kotak Mahindra Bank (9.8 per cent), Axis Bank (8.82 per cent), ICICI Bank (8.81 per cent), and SBI Cards (3.04 per cent). With a stellar track record of outperforming the category average in multiple timeframes, and impressive risk-adjusted metrics, the fund is a compelling investment opportunity for a moderate risk-taking investor.

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