US bank crisis: Banking sector MFs lost 6% in a week

Banking mutual funds have lost up to 6 per cent in the last week following the collapse of Silicon Valley Bank and Signature Bank that dented investors’ sentiment in the banking and financial services space. The failure of the two US-based banks sent shockwaves across the global financial system and weakened the sentiments in the banking sector in India too, wherein shares took a beating and declined in the range of 3-13 per cent in the week under review. However, experts believe that the direct impact on the Indian banking sector was negligible to low. The incessant selling in the bank stocks is clearly reflected in the banking sector mutual funds, as evident from the short-term performance returns of the 16 schemes under the category. Of the 16 banking sector mutual funds, all of them have given negative returns to investors in the range of 1.6 per cent to 6 per cent in the week ended March 17, according to an analysis of data compiled by ACE MF Nxt. So far this year, these funds have given negative returns ranging from 8 per cent to 10 per cent, the data showed. The funds which have lost more than five per cent in the last week are Aditya Birla Sun Life Banking and Financial Services Fund, Tata Banking and Financial Services Fund, HDFC Banking and Financial Services Fund, LIC MF Banking and Financial Services Fund, and Nippon India Banking and Financial Services Fund. However, on nine-month and 1-year time frames, the returns are positive, infact, all the banking and financial services funds have given returns of up to 20 per cent and up to 12 per cent, respectively, data showed. The reasons for the fall in these thematic mutual funds can be attributed to the volatile stock market conditions and the rising interest rates. Ever since the rate hike cycle commenced, the expectations of lower net interest margins, higher cost of funds and impact on credit growth abound, Gopal Kavalireddi, Head of Research at FYERS, said. With banks increasing the deposit