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Financial Services Stocks in Benchmark Indices: A Growth Story

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Financial Services Stocks in Benchmark Indices: You see the returns from your mutual fund units growing. Would it be an indicator of the market booming, or, is it just your underlying assets? Let us consider that you have invested in an index fund or any other passive funds India. Here the returns on your units are directly the result of your mutual fund scheme’s underlying securities basket. This basket can contain companies, industry, sector and asset classes. 

 

 

Passive funds India investing in benchmark indices are investing in various sectors like financial services, manufacturing and more. Let us look at a specific component of the benchmark index, financial services stocks and their contribution to the overall benchmark indices growth.

 

Nifty50 And SENSEX Index Composition

 

As you can see in the table below, financial services account for the highest sectoral weightage in the benchmark index:

 

Nifty 50 Index CompositionWeight (%)
Financial Services34.25
Information Technology12.92
Oil, Gas & Consumable Fuels10.76
Fast Moving Consumer Goods8.22
Automobile and Auto Components7.43
Healthcare3.99
Telecommunication3.98
Construction3.92
Metals & Mining3.54
Power3.12
Consumer Durables2.47
Construction Materials2.08
Consumer Services1.46
Capital Goods0.94
Services0.93

Source: NSE

 

Here is the list of financial services companies that form the composition of SENSEX:

 

CompanySector
BAJAJ FINANCE LIMITEDFinancial Services
STATE BANK OF INDIAFinancial Services
HDFC BANK LTD.Financial Services
KOTAK MAHINDRA BANK LTD.Financial Services
ICICI BANK LTD.Financial Services
INDUSIND BANK LTD.Financial Services
AXIS BANK LTD.Financial Services
HCL TECHNOLOGIES LTD.Information Technology
BHARTI AIRTEL LTD.Telecommunication
MARUTI SUZUKI INDIA LTD.Consumer Discretionary
ULTRATECH CEMENT LTD.Commodities
TATA CONSULTANCY SERVICES LTD.Information Technology
NTPC LTD.Utilities
TECH MAHINDRA LTD.Information Technology
POWER GRID CORPORATION OF INDIAUtilities
ADANI PORTS AND SEZServices
BAJAJ FINSERV LTD.Financial Services

Source: Asia Index

 

Learn about index funds and the banking and financial services stocks in its composition here

 

Financial Services Stocks In Benchmark Indices 

 

The Nifty 50 and SENSEX are two of the leading benchmark stock market indices in India. Both indices include several prominent financial services companies, demonstrating the sector’s significance in the Indian economy.

 

Here is a look at some of the major financial services companies in Nifty 50 and SENSEX:

 

1. HDFC Bank Ltd

 

A leading private sector bank known for its wide range of financial products and services, including retail banking, wholesale banking, and wealth management.

 

2. ICICI Bank Ltd

 

Another major private sector bank offering a comprehensive suite of financial products and services, including retail banking, corporate banking, and investment banking.

 

3. State Bank of India

 

India’s largest public sector bank with a vast network of branches across the country, offering a wide range of banking and financial services.

 

4. Bajaj Finance Limited

 

A leading non-banking financial company (NBFC) specialising in consumer finance, SME finance, and wealth management.

 

5. Bajaj Finserv Ltd

 

Another prominent NBFC offering a diverse range of financial products and services, including insurance, lending, and investment solutions.

 

6. Kotak Mahindra Bank Ltd

 

A leading private sector bank known for its strong presence in the retail banking, corporate banking, and investment banking segments.

 

7. Axis Bank Ltd

 

A well-established private sector bank offering a wide range of financial products and services, including retail banking, corporate banking, and NRI services.

 

8. IndusInd Bank Ltd

 

A private sector bank known for its focus on customer service and innovation, offering a variety of financial products and services, including retail banking, corporate banking, and wealth management.

 

What These Companies Do

 

These financial services companies play a vital role in the Indian economy by providing a wide range of financial products and services to individuals, businesses, and institutions. Their offerings typically include:

 

1. Banking

Savings accounts, current accounts, loans (personal, home, auto, education), credit cards, and other banking services.

 

2. Insurance

Life insurance, health insurance, motor insurance, and other insurance products.

 

3. Investments

Mutual funds, brokerage services, portfolio management, and other investment solutions.

 

4. Wealth Management

Financial planning, investment advisory, and other wealth management services.

 

Benefits of Investing in Financial Services Companies

 

Investing in financial services companies can offer several potential benefits, including:

 

1. Growth Potential

 

The financial services sector is often considered a growth sector, particularly in emerging economies like India, where the demand for financial products and services is increasing.

 

2. Dividend Income

 

Many financial services companies have a track record of paying dividends to their shareholders, providing a steady stream of income.

 

3. Diversification

 

Investing in financial services companies can help diversify an investment portfolio, as the sector’s performance is often influenced by different factors than other sectors.

 

4. Economic Growth

 

A strong financial services sector is essential for economic growth, as it provides the capital and financial infrastructure necessary for businesses to invest and expand.

 

Important Considerations For Investing In These Companies 

 

1. Market Volatility

The financial services sector can be sensitive to market volatility and economic conditions.

 

2. Regulatory Changes

Regulatory changes can impact the profitability and growth prospects of financial services companies.

 

3. Competition

The financial services sector is highly competitive, which can put pressure on margins.

 

Overall, by investing in Nifty 50 and SENSEX, through passive funds India, you can invest in these financial services companies. The stocks of these companies can be a better option for investors seeking growth potential, dividend income, and diversification. However, it is important to research individual companies thoroughly and understand the potential risks before investing.

 

 

Wrapping Up

 

In conclusion, the growth of your mutual fund units in an index fund is directly tied to the performance of the underlying assets, including financial services companies which hold significant weight in benchmark indices like Nifty 50 and SENSEX. These companies play a crucial role in India’s economy, offering a wide range of services and potential for growth. Investing in them through passive funds India like index funds can provide diversification and potential for returns. However, it is essential to be aware of market volatility and other risks. Therefore, it is always important to research thoroughly before investing.

 

 

Interested in how we think about the markets?

Read more: Zen And The Art Of Investing

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AREVUK Advisory Services Pvt Ltd | SEBI Registration No. INA200005166
DISCLAIMER: Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investments in securities market are subject to market risks. Read all the related documents carefully before investing. The securities quoted are for illustration only and are not recommendatory.

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