ABOUT THE ETF

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Concentrated index with exposures to the largest banks in India

As of end-March 2024, portfolio featured just 12 stocks

Private banks constitute 85.5 per cent of the portfolio, while PSU banks make up the rest

pected to sustain, the Bank Nifty’s valuations on a oneyear forward basis are also quite moderate, with the PE multiple at 14.5 times and the price to Book Value ratio at 2.3 times. Given that Indian banks usually transmit rate cuts to depositors more quickly than they do to borrowers, the peaking out of domestic interest rates is likely to work in favour of bank profitability in the coming year. Strangely enough, sector leaders in banking – HDFC Bank, SBI and ICICI Bank – which make up a near 62 per cent weight in the Bank Nifty, currently trade at a very reasonable valuations, at a discount to smaller peers in the sector. This adds to the attractiveness of the

Banking stocks make up an over 30 per cent weight in the Nifty50 and account for a significant weight in India’s largecap stock universe. For India to sustain a 7 per cent plus growth in the coming years and for the private capex cycle to take off, participation from the banking sector is essential. Therefore, stocks of the leading banks that make up the Bank Bees are likely to attract an automatic share of the passive flows into Indian stocks from global investors.

RISKS

Investments in the Bank Nifty are only suitable for investors with a stomach for high volatility. It is among the most volatile sectoral indices in India, with activelytraded derivative contracts adding to its wild swings. A rolling return analysis of the Nippon India Bank Bees, since 2005, show high variability between its good and bad years. ETF units in the stock market tend to move into a premium over the NAV at times. Investors need to track entry and exit prices carefully to avoid overpaying for the units.