NFO Pick – (HSBC Financial Services Fund)

WHY HSBC FINANCIAL SERVICES FUND NOW?

Here are some key reasons for investing in the financial services theme.

• India’s GDP growth has been the best among the large economies and as India transitions to $10 trillion GDP, financial services will be the big catalyst.
• To cover a wide spectrum of financial services including banking, insurance, asset management, wealth management, stock brokers, microfinance, and Fintech.
• Financial services enjoys a 2X multiplier with GDP. Indian financial assets slated to touch $130 Trillion by year 2047 from the current level of $6.4 Trillion.
• Between 2014 and 2024, the market cap of India lending business has grown 4X, while the market cap of non-lending business has grown 15X.

But, how will HSBC MF construct the financial services portfolio.

HSBC FINANCIAL SERVICES FUND – PORTFOLIO CONSTRUCTION

Portfolio construction for HSBC Financial Services Fund will be predicated on these lines.

• The fund will have a higher mix of mid-caps and small caps and also the fund will be overweight on non-lending financial services compared to the index.
• The portfolio will be broadly divided into 3 categories; Boring Compounders, Growth Accelerators, and Disruptive Innovators.
• Boring Compounders will be high quality large cap companies which have strong balance sheets, and carry low business cyclical risks.
• Growth accelerators will be the companies in the mid-cap and small cap space gaining market share rapidly, but carrying moderate risk.
• Finally, the Disruptive Innovators will be market cap neutral, but will focus on disruptive business models with the ability to disrupt traditional models.

A QUICK LOOK AT THE BSE FINANCIAL SERVICES INDEX

Here are some of the highlights of the BSE  Financial Services Index to which the HSBC Financial Services Fund will be benchmarked.

• The index comprises of 151 companies with 84 lending companies and 67 non-lending companies. Their index weight is in the ratio of 81.6:18.4.
• Overall, the large caps account for 76.5% of the index market cap, mid-caps account for 14.3% and small caps account for the balance 9.2%.

In terms of asset allocation, the HSBC Financial Services Fund is expected to be overweight on non-lending businesses and underweight on lending businesses.

GLANCE AT THE HSBC FINANCIAL SERVICES FUND NFO

Here are key details of the HSBC Financial Services Fund NFO.

• The NFO opened on February 06, 2025 and closes on February 20, 2025. Regular sale and repurchase of units at NAV linked prices will start within 15 days after closure.
• On the risk-o-meter, HSBC Financial Services Fund is classified as “Very High Risk” due to its predominant equity exposure, and indexed to the theme of financial services.
• Investment objective of the fund is to generate long term growth, by investing in the financial services sector, which is likely to gain from expanding financial inclusion.
• There is no entry load. However, if sold within 1 year of the allotment date, exit load of 1% of redemption value will be charged, beyond 10% of the total holding.
• The HSBC Financial Services Fund will offer regular and direct plans. In terms of the options, the fund offers the growth and the IDCW plan to investors.
• Fund manager for HSBC Financial Services Fund is Gautam Bhupal. The minimum investment in the fund will be ₹5,000. Benchmark is BSE Financial Services Index TRI.
• HSBC Financial Services Fund will be treated as an equity fund for tax purposes. STCG (less than 12 months) will be taxed at 20% plus cess. LTCG (over 12 months) will be taxed at 12.5%, with ₹1.25 lakhs base exemption per financial year.

The HSBC Financial Services Fund offers a good model for long term wealth creation through a very thematic focus on the financial services industry in India. However, considering the volatility in the segment, a SIP approach would be strongly recommended.