Mutual Funds centred around the Banking, Financial Services, and Insurance (BFSI) sector have steadily emerged as compelling investment avenues for individuals seeking exposure to India's financial ecosystem. As one of the most integral pillars of the Indian economy, the BFSI sector encompasses commercial banks, insurance firms, non-banking financial companies (NBFCs), asset management companies, stock exchanges, rating agencies, and other financial institutions.
Driven by India's expanding economy and increasing financial inclusion, the BFSI sector stands at the forefront of structural transformation. Consequently, BFSI Mutual Funds are increasingly being recognised as viable instruments for long-term wealth creation, offering investors focused access to the country's financial development.
BFSI Mutual Funds, also referred to as banking and financial services Mutual Funds, are sectoral equity schemes that invest a minimum of 80% of their corpus in equities and equity-related instruments of companies operating within the BFSI space. This includes private and public banks, NBFCs, insurance providers, wealth management firms, asset managers, and other allied institutions.
Unlike diversified equity funds that allocate assets across multiple sectors, BFSI Mutual Funds concentrate on the financial services segment, thereby offering targeted exposure. These funds are also managed by professional fund managers who create a diversified yet sector-specific portfolio by pooling capital from numerous investors. This enables participants to gain from sectoral trends without needing to invest in individual financial stocks.
Given their specialised nature, BFSI Mutual Funds are best suited for specific investor profiles:
Experienced investors: These funds require a nuanced understanding of sectoral movements and macroeconomic factors. Therefore, investors with a background in financial markets may benefit more from them.
Long-term investors: Due to potential short-term volatility, BFSI Mutual Funds are ideal for investors with a time horizon of at least three to five years.
Investors with higher risk tolerance: As sectoral funds inherently carry concentration risk, they are more appropriate for individuals with an aggressive risk appetite.
Investors with sectoral conviction: Those who are optimistic about the growth of India's financial services landscape may find these funds aligned with their outlook.
Top 10 BSFI Mutual Funds as of June 2025
The following Mutual Funds have been ranked according to their Assets Under Management (AUM), providing insight into their relative size and popularity among investors. All data presented is as of June 30, 2025.
This ranking reflects both investor confidence and fund house positioning within the BFSI theme. It serves as a useful starting point for those evaluating sector-specific investment opportunities. They have demonstrated resilience, consistency, and strong risk-adjusted returns in the BFSI segment:
1. Nippon India Banking & Financial Services Fund
Launched in May 26, 2003, this fund is one of the oldest in the segment. Managed by Vinay Sharma and Bhavik Dave, it commands ₹7,497 crore in assets under management (AUM). With 97% equity exposure and a focus on large-cap (64.1%) and mid-cap (23.4%) stocks, the fund has achieved a 5-year compound annual growth rate (CAGR) of 26.7% and a 10-year CAGR of 13.0%. Its beta of 0.9 suggests a moderate correlation with market movements.
2. SBI Banking & Financial Services Fund
Incepted on February 26, 2015, this fund has quickly built a reputation under the stewardship of Milind Agrawal. It manages ₹8,538 crore in AUM with a 93.6% equity allocation. It holds the highest exposure to mid-cap stocks (23.5%) and has delivered a 5-year CAGR of 22.5% and a 10-year CAGR of 15.6%. A beta of 0.9 and a Jensen’s Alpha of 0.9 highlight superior risk-adjusted returns.
3. ICICI Prudential Banking & Financial Services Fund
Launched on August 22, 2008, and managed by Roshan Chutkey, this fund holds the largest AUM in the category at ₹10,088 crore. With 93.5% in equities, it balances large (66.8%), mid (14.3%), and small-cap (11.5%) investments. It has recorded a 5-year CAGR of 22.0% and a 10-year CAGR of 13.1%.
4. HDFC Banking & Financial Services Fund
This relatively new fund was launched on July 1, 2021, and is managed by Anand Laddha. With ₹4,290 crore in AUM, it has a 3-year CAGR of 15.8% and a 1-year return of 9.0%. It boasts 99.2% equity exposure, favouring large-cap stocks (66.5%).
5. Aditya Birla Sun Life Banking & Financial Services Fund
Launched on December 14, 2013, this fund is managed by Dhaval Gala and oversees ₹3,625 crore. It has generated a 5-year CAGR of 22.2% and a 10-year CAGR of 13.2%. With a 97.9% allocation to equities, the fund leans towards large-cap holdings (68.0%).
6. Tata Banking & Financial Services Fund
Managed by Amey Sathe and launched on December 28, 2015, this fund holds ₹2,985 crore in AUM. It has delivered a 5-year CAGR of 21.1%. The fund maintains 95% equity exposure and tilts towards large-cap (57.8%) and mid-cap (19.6%) stocks.
7. Mirae Asset Banking and Financial Services Fund
A relatively newer entrant, this fund was launched on December 11, 2020, and is managed by Gaurav Kochar. It manages ₹2,085 crore with 99.6% invested in equities. Its 3-year CAGR stands at 21.6% with a 1-year return of 9.9%.
8. Sundaram Financial Services Opportunities Fund
Initiated on July 9, 2008, this fund is managed by Rohit Seksaria and Ashish Aggarwal. With ₹1,605 crore in AUM, it has posted a 5-year CAGR of 23.5% and a 10-year CAGR of 13.5%. Equity exposure is at 94.9%, and its portfolio includes 64.9% large-cap and 18.7% mid-cap stocks.
9. UTI Banking & Financial Services Fund
Launched on July 30, 2015, and managed by Preethi R S, this fund handles ₹1,356 crore. It has a 5-year CAGR of 22.0% and a 10-year CAGR of 10.7%. With a 98.2% equity allocation and 69.3% large-cap exposure, the fund offers relatively stable returns.
10. Invesco India Financial Services Fund
Launched on July 14, 2008, and co-managed by Hiten Jain and Dhimant Kothari, this fund manages ₹1,456 crore. It leads in performance with a 3-year CAGR of 25.1%, a 5-year CAGR of 23.1%, and a 10-year CAGR of 14.3%. Its 98% equity allocation comprises 59.3% large-cap and 24.1% mid-cap stocks.
Fund managers of BFSI Mutual Funds carry out rigorous research to identify financially robust companies with solid fundamentals and growth potential. This process begins with sectoral analysis, followed by company-specific evaluations of parameters such as return on equity, asset quality, loan book growth, and regulatory compliance.
The funds are benchmarked against indices like the Nifty Financial Services Index. The net asset value (NAV) of these funds fluctuates daily based on the performance of underlying holdings. Investors can redeem units at the prevailing NAV, ensuring transparency and liquidity.
Benefits of investing in BFSI Mutual Funds
Professional oversight: Managed by experienced professionals with sector-specific expertise.
Focused exposure: Direct participation in India’s financial services growth story.
Intra-sector diversification: Exposure to a wide range of BFSI sub-sectors such as banking, insurance, NBFCs, and asset management firms.
Growth-oriented: Positioned to benefit from macroeconomic growth, rising financial inclusion, and digital adoption.
Liquidity: Units can be redeemed on any business day, offering investor flexibility.
Regulatory backing: The BFSI sector operates under robust regulatory frameworks, providing stability and investor protection.
Comparison with other Thematic Funds
BFSI Mutual Funds differ from other sectoral or thematic funds in the following ways:
Resilience: Unlike high-volatility sectors such as technology, BFSI plays a foundational role in the economy, offering relative stability.
Regulatory safeguards: The financial sector is heavily regulated by entities like the Reserve Bank of India and SEBI, ensuring operational discipline.
Broader sector scope: BFSI funds offer wider intra-sector diversification compared to more narrowly defined thematic funds.
Economic cyclicality: More susceptible to interest rate cycles and macroeconomic conditions than defensive sectors such as FMCG or healthcare.
Sub-sector allocation in BFSI Mutual Funds
The typical sector allocation within a BFSI mutual fund is as follows:
Banking (60 to 70%): Major public and private sector banks dominate this segment.
Insurance (10 to 15%): Includes both life and general insurance providers.
NBFCs (10 to 20%): Lending and finance institutions operating outside the traditional banking structure.
Asset Management and Financial Services (5 to 10%): Includes mutual fund companies, brokers, and fintech platforms.
Others (5 to 10%): Payment platforms, wealth tech companies, and niche service providers.
Considerations before investing
Risk evaluation: Understand the sector-specific risks and prepare for market volatility.
Long-term commitment: A holding period of three to five years is essential.
Market timing: Sectoral funds demand sharper timing for entry and exit.
Portfolio exposure: Limit BFSI mutual fund allocation to 10 to 15% of the total investment portfolio.
Fund selection: Assess historical performance, fund manager expertise, and expense ratio.
Macroeconomic sensitivity: Monitor interest rates, monetary policy, inflation, and regulatory updates.
Conclusion
BFSI Mutual Funds offer an efficient gateway to capitalise on India's expanding financial services ecosystem. Their focused yet diversified nature within the sector makes them attractive to long-term investors with the risk appetite and conviction to ride the growth curve. While past performance does not guarantee future returns, the top 10 funds listed above have demonstrated resilience, strategic management, and potential for wealth creation.
With appropriate diligence, risk management, and long-term planning, BFSI sector Mutual Funds can serve as valuable constituents of a well-diversified investment portfolio. As India continues its trajectory towards becoming a $5 trillion economy, investors aligned with this structural opportunity may find BFSI Mutual Funds a fitting vehicle for sustainable financial growth.
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