Bank of India Banking & Financial Services Fund NFO: Opportunity to invest in the fast-growing BFSI sector

The Bank of India AMC is launching the Bank of India Banking and Financial Services Fund NFO on 8^th January 2026. The NFO will close on 22^nd January 2026. In this article we will review the Bank of India Banking and Financial Services Fund in light of the growth and transformation of India's Banking and Financial Services (BFSI) sector, and its contribution to the growth of Indian economy.

Importance of Banking and Financial Services in India

The Banking and Financial services sector is the one of the main drivers of a nation's economy. The BFSI sector in India has experienced substantial growth, with a market cap increase of over 50 times in 20 years. India is projected to become the world's third-largest economy by 2030, with a GDP of $7.3 trillion (estimated) and the BFSI sector will be pivotal in the India growth story. The financial assets to GDP ratio of some of the major economies is 4 - 5X. If India is to become a $30 Trillion economy by 2047, then its financial assets should multiply 20X in the next two decades.

Why Banking and Financial Services?

• BFSI share in Nifty 50 has increased multi-fold from ~13% in 2005 to ~37% in 2025
  
  

  

  Source: Bloomberg. Data for the financial year end of respective years, Motilal Oswal Institutional Research



• BFSI's faster growth showcases sectoral leverage to GDP expansion over the last 2 decades
  
  

  

  Source: Bloomberg. Data for the financial year end of respective years, Motilal Oswal Institutional Research



• Financial Services Index has generated ~28x returns over the last 25 years
  
  

  

  Source: ACEMF, Bank of India product presentation. Data as on Nov 30^th 2025. Returns are Compounded Annualised Growth Rate (CAGR). Above data is rebased at 1000 and rounded off and calculated for the period 3^rd Jan 2005 till 30^th Nov 2025



• BFSI Sector remained relevant in the US Market over last 25 years: BFSI Sector market cap to S&P 500 Index market cap has remained steady between 13-16%. It reflects continued relevance of the sector in mature economies
  
  

  

  Source: Bloomberg, Yes Securities Institutional Research



• Many investors associate financial services primarily with banks. Although banks are a very important part of financial services, the financial services sector is much broader than purely the banking sector. As of 2025, the share of banks in BFSI’s market cap have come down from 85% in 2005 to just 57% in 2025 (source: MOFSL, April 2025). This reflects the rising contribution of NBFCs, fintech, AMCs, and insurers as major value drivers in the sector. This transformation has been powered by digitization, fintech innovation, rising retail participation, and the growing demand for diverse financial services.
  
  

  

  Source: BOI product presentation. Data as on 31^st March (Financial year end). Source: MOFSL Research Returns are Compounded Annualised Growth Rate (CAGR).



• Market Cap of BFSI Sector has grown at a CAGR of ~20%. While, Insurance, Capital Market and Fintech have shown a CAGR of more than 55% over the last 10 years
  
  

  

  Source: BOI product presentation. Data as on 31^st March (Financial year end). Source: MOFSL Research Returns are Compounded Annualised Growth Rate (CAGR).



• BFSI Sector has outperformed broad markets in 13 out of 20 Years. In the recent past, after improvement in balance sheet of most of the Financial Services Sector players, the outperformance is significant. (Data as on CY 30^th Nov 2025)
  
  

  

  Source: BOI product presentation. ACEMF. Returns are Compounded Annualised Growth Rate (CAGR). Data shows the CAGR (%) for each calendar year ending 31^st December. For the CYTD 2025 the data is as on Nov 30^th 2025



• Financial Services Sector has showcased higher return potential than Broad Markets with Lower Volatility
  
  

  

  Source: BOI product presentation. ACEMF. Data as on Nov 30^th 2025 . The returns are shown as Mean based on Compounded Annualised Growth Rate (CAGR). Volatility/Risk is calculated based on daily returns across periods on an annualized basis. Time Period: 3^rd Jan 2005 to 30^th Nov 2005



• Opportunity still prevails in mature business’; high growing segments continues to show huge potential.
  
  

  

  Source: Bloomberg, RBI, IRDAI, AMFI, Investec Research. Above data is shown on a Compounded Annualised Growth Rate (CAGR) basis from 2009 till March 31, 2025.

Why should you invest in the Banking and Finance Sector now?

• BFSI Sector is trading at a discount compared to Nifty 50.
  
  

  

  Source: Bloomberg, Elara Equity Research. Data as on 30^th Nov 2025. Above data is P/B for respective index. BFSI Sector- Nifty Financial Services TRI, Nifty 50 TRI.



• Banks are trading at a significant discount to the India Broad Market
  
  

  

  Source - Bloomberg, Elara Equity Research. Data as on 30^th Nov 2025. MSCI - Morgan Stanley Capital International India Index



• Healthy Balance Sheet expected to support future growth: While, banks’ profit has seen sharp growth in recent past, going ahead – strong capital adequacy, decade low NPAs and improving ROE would be the Key enablers
  
  

  

  Source: Bloomberg, RBI, Elara Equity Research. The above data is as on every financial year end of every respective year.



• Significant growth in financial services sector is needed for India to catch up with the developed markets, in terms of the sector’s penetration.
  
  

  

  Source: IRDAI, AMFI, World Bank Data as on CY 2024



• Fintech in India shows significant potential to expand in next 10 Years. UPI payment volume is expected to increase by 3.5X in next 10 Years
  
  

  

  Source - RBI, MOSPI, Elara Securities Estimate. The above data is as on every financial year end of every respective year.



• Non-lending to help accelerate the BFSI Sector reflected in increasing mix of non-lending within sector mix
  
  

  

  Source: Elara Securities Research Data as on respective financial year end.

Investment approach of the Bank of India Finserv Banking and Financial Services Fund NFO

The fund managers follow a 3-pronged approach

Portfolio Construction Approach of the fund

• Invest predominantly in Banking and Financial Services companies to maintain stability and growth


• Participate in high growing segments within Financial Services such as Capital Markets, Insurance and Digital first approach FinTech


• Identify businesses with pristine execution track record with high ROE within each sub-segment


• Investment remains market capitalisation agnostic


• Minimum 80 % exposure in the Banking & Financial Services Sector; and upto 20% exposure outside the defined sector Universe


• Top down and bottom-up approach

Who should invest in Bank of India Banking and Financial Services Fund NFO?

• Investors who are looking for long-term capital appreciation through thematic investments.


• Investors who are aiming to capitalise on the growth potential within banking, financial services, and related sectors.


• Investors with an investment horizon of minimum 5 years.


• Investors who have a very high-risk appetite.

You should consult your financial advisors or mutual fund distributors, if Bank of India Banking and Financial Services Fund NFO will be suitable for your investment needs.