Canara Robeco Banking and Financial Services Fund NFO: Invest in the future of the Financial Services sector

The Canara Robeco MF is launching the Canara Robeco Banking and Financial Services Fund NFO on 27^th February 2026. The NFO will close on 13^th March 2026. In this article we will review the 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 (source: IBEF). 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. (source: PIB). The financial assets to GDP ratio of some of the major economies is 4 - 5X (source: US Federal Reserve, World Bank). If India is to become a $30 Trillion economy by 2047, then its financial assets should multiply 20X in the next two decades

Not just banks

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. The transformation of traditional banking to modern banking has been a journey of innovations and digital/fintech revolution. Powered by digitization, fintech innovation, rising retail participation, and the growing demand for diverse financial services, modern banking has translated the scope of the sector to B: Banking, F: Funding, S: Savings and I: Investment.

Source: Canara Robeco AMC. Internal Analysis, Paisabazaar Consumer Credit Report (for Borrower's Age Group). Borrower's Age Group refers to Entry level Age of Retail Borrower for their first loan

Drivers of the transformation of the BFSI sector

• Savings Pattern has evolved over the years: The concept of safety in savings has progressed to a leverage for investment. In the chart below you can see that the percentage of deposits and small savings has decreased from 71% in FY 71-80 to 55% in FY 21-24. On the other hand, the share of Provident and Pension Funds and other investment avenues like mutual funds, shares and debentures has increased from 20% to 27% in the same period heralding the shift in the savings patterns.
  
  

  

  Source: RBI, MOSPI, 360 One Asset Research. All figures are approximations and are rounded off to the closest percentage. The chart's data is on flow basis and represents data based on average for the period



• The frequency of loans per individual is going up: There has been a shift in borrowing behaviour, and it is no longer event driven but lifestyle driven characterised by early credit adoption and longer credit life cycle, rising loan stacking leading to multiple concurrent loans, and small-ticket, high-frequency credit growth and ease in credit access and digitisation.


• Changing mix of BFSI: Market share across sectors has shifted from public to private.
  
  

  

  Source: RBI, IRDAI, AMFI. Note: APE – Annualized Premium Equivalent; GWP – Gross Written Premium; AUM – Assets Under Management



• Businesses are evolving: Value migration is happening even at Lender's end and large financial groups have expanded beyond core banking and lending


• Jam Trinity: The major driver for of transformation in banking sector has been the Jam Trinity encapsulating the Jan Dhan accounts, Adhaar and Mobile adoption in the country.
  
  

  

  Source: RBI, UIDAI, PIB, Motilal Oswal BFSI thematic report, PMJDY. All data is as of December 2025 & All figures are in approximation and are rounded off to the closest integer



• Digital transactions witnessed a huge surge post covid
  
  

  

  Source: MOFSL, RBI



• Low Data Cost: The low cost of data and access to smartphone has led to increase in internet users driving the digital banking boom.
  
  

  

  Source: MOFSL, RBI

Why Banking and Financial Services?

• BFSI share in Nifty 50 has increased multi-fold from ~14% in 2004 to ~37% as 31^st January 2026. (Source: Motilal Oswal, NSE)


• Bank deposits and credit have been growing at 10 - 11%.
  
  

  

  Source: RBI



• BFSI Sector has Huge Profit Opportunity: Profit Pool is increasing with the advent of Fintech in FY 2025
  
  

  

  Source: Canara Robeco AMC, RBI, ACE Equity



• Financial sector is an important part of India's Growth Story
  
  

  

  Source: Canara Robeco AMC, Bloomberg, ACE Equity, NSE, Company Data. Note: PAT Contribution = (Aggregate of PAT of all Listed Financial Entities in BSE 500)/(Aggregate of PAT of all Listed Entities in BSE 500



• BFSI has grown at a pace superior than Indian Economy
  
  

  

  Source: ICRA MFI 360



• Financial Services Index has performed better than broad market Index across time frames
  
  

  

  Source: Canara Robeco AMC Internal Research, ICRA MFI 360



• Impressive Nifty Financial Services TRI Journey: The Nifty Financial Services TRI Annualized CAGR from 1^st April 2010 to 31^st January 2026 is ~14%, despite the many volatile periods it has endured along the way.
  
  

  

  Source: Canara Robeco AMC, ICRA MFI 360

Why invest in BFSI 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.



• Improved balance sheet and financial health
  
  

  

  Source: RBI



• Corporate leverage at 15-year lows: Credit growth is poised to increase
  
  

  

  Source: Canara Robeco AMC, Bloomberg, Company Data from ACE Equity



• Under-penetration across segments: Low sector penetration: 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

  
  

  The charts below show the penetration of various BFSI sectors in India Vs other economies around the world. The low penetration in India gives the investors a window of opportunity to participate in the long runway for BFSI sector.

  
  

  

  Source: IMF, World Bank, OECD; AMFI, Jefferies

Canara Robeco Banking and Financial Services Fund NFO

The Canara Robeco Banking and Financial Services Fund NFO is an open-ended equity scheme investing in the BFSI sector. The investment objective of the fund managed by fund managers Mr. Amit Kadam and Mr. Shridatta Bhandwaldar, is to generate long term capital appreciation by investing in equity related instruments of entities engaged in the banking and financial services sector.

The fund NFO offers a special facility only during the NFO period.

Portfolio Structure and Construction

The fund targets companies having a mix of stability and growth. The Steady Compounders are the low risk established leaders with a strong balance sheet, and proven track record coupled with a stable ROE. 70 companies are filtered from a universe of 261 entities in the entire sector, using metrics such as high growth potential, innovativeness in their business model, potential for higher ROEs and the market share expansion.

Stock Selection Process

Who should invest in Canara Robeco 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 who want to tactically allocate to financial services during phases of improving credit growth, asset quality and ROE expansion.


• Investors with an investment horizon of minimum 5 years.


• Investors who have a very high-risk appetite.