Power of Trinity in your investment portfolio: 3 SBI MF Thematic Funds

On the occasion of our 75^th anniversary of Independence in 2022, the Government laid out its vision that India will become a developed economy in the next 25 years, i.e. by 2047, when the country will celebrate the 100^th anniversary of Independence. In the last 25 years, our GDP grew from US $416 billion to US $3.4 trillion, i.e. 8 times growth (source: World Bank, CY 1997 - 2022). If we extrapolate the CAGR growth over the next 25 years, then by 2047, our GDP will grow to nearly US $28 trillion, putting India in the top 3 economies of the world. Global, infrastructure and BFSI are three themes/sectors that will play an increasingly important role in the India Growth Story in the coming years. Investing in these themes/sectors can generate superior returns and wealth creation. SBI Mutual Fund has called these three themes “The Power of Trinity”. In this article, we will discuss the Power of Trinity and three SBI MF schemes that invest in these themes/sectors.

What are thematic funds?

Thematic funds are equity mutual fund schemes that invest in industry sectors that can benefit from these macro-trends. Examples of investment themes are BFSI, infrastructure, healthcare, global, IT, etc. Thematic funds are usually more concentrated than diversified equity funds. They can form part of your satellite / non-core portfolio to enhance portfolio returns over investment horizons. Let us discuss the three themes in the Power of Trinity.

Global theme

• Rising FDI flows: India is a major global hub for Foreign Direct Investments. India was in the Top 10 global FDI destinations (source: Economic Survey 2023). India’s FDI inflows have increased 20 times from 2000-01 to 2021-22, with a cumulative investment of nearly $850 billion.


• Global investment hub: Emerging manufacturing hub in global value chains, especially in the post-COVID world, with global corporations implementing a China + 1 strategy. India enjoys the advantage of a demographic dividend, a growing consumer market and rising per capita income. India is also the global leader in the digital transformation of government and private sectors.


• Resilient India: High forex reserves and sustained FDIs have made India resilient in global economic crises. Growing exports have provided an adequate buffer against the monetary policy normalisation in advanced economies and the widening of the Current Account Deficit arising from geopolitical conflicts.


• Global footprint: India contributes 60% to the global production of vaccines. India is one of the largest agricultural product exporters in the world. It is the preferred destination for Information Technology and Business Process Outsourcing worldwide. India continues to be a leader in the global sourcing industry with a 52% market share (as of FY20) in services exports from the country.


• International exposure: In this theme, you can get exposure to international stocks having strong global brands.

Infrastructure theme

• Improving corporate profitability: The corporate profits to GDP ratio has been improving. Leverage, as reflected by debt/EBITDA, for BSE-500 companies at 1.2x in FY21 is at the lowest ever since 1999.


• Improving capacity utilization: Momentum continues in demand and business profitability. Capacity utilization levels that had fallen sharply have started to improve, and we expect further improvement in these levels over the next few quarters.


• Government policy reforms: The target set by the Government for the contribution of the manufacturing sector to total economic output is 25%. The government’s focus towards self-reliance in manufacturing, i.e. “Atmanirbhar Bharat”, is driven by multiple reforms across sectors.


• Higher budgetary allocation for infrastructure spending: Multiple measures by the Government to boost capex and infrastructure spending. The percentage of the union government’s capex to GDP is expected to touch 2.9% in FY23, as against an average o of 1.7% during the last decade (as per budget 2022-23). Government spending on infrastructure will likely have a multiplier effect on private sector capex spending.


• Funding capability comfort: Credit growth, especially in private banks and reduction in NPA levels have been a big positive for the margins. There is scope for banks to start funding good quality capital expenditure during the next up-cycle.

BFSI Theme

• Credit pickup: Corporate credit off-take is showing signs of improvement. Improving capacity utilization and working capital-led demand should further support the momentum.


• Improving asset quality: Bank balance sheets are in better shape today, with adequate cover on bad assets and ample capital. The outlook is benign, and capital levels across most lenders are quite robust, which will give lenders more comfort to grow.


• Net Interest Margins of banks will improve further: Net Interest Margins for banks with strong liabilities franchises are expected to improve due to improving credit demand and rising rates.


• Large private sector banks are gaining market share: Large private sector banks are well positioned with management stability, strong liabilities franchise, moderate stress and adequate capital buffers. Banks with strong retail deposit franchises and diversified loan books are expected to do well.


• Positive outlook for some NBFCs: Niche segments such as micro-finance, vehicle, gold and housing finance are expected to see strong growth


• Structural opportunities: Structural opportunities from formalization, digitalization and financialisation remain intact

Three thematic funds - Power of Trinity in your portfolio

SBI Magnum Global Fund

SBI Magnum Global Fund is a thematic fund that invests in multinational companies (MNCs). The scheme was launched in 1994 and has Rs 6,273 crores of assets under management (AUM) as on 31^st August 2023. The total expense ratio (TER) of the scheme is 1.89%. The scheme invests in companies that have proven their mettle across different countries and business environments, have superior businesses and enjoy strong economic moats. The scheme has delivered 17.1% CAGR returns since inception (as on 15^th September 2023). Click on this link, SBI Magnum Global Fund, to know the performance of the scheme, portfolio and other scheme-related information.

SBI Infrastructure Fund

SBI Infrastructure Fund is a thematic fund that invests in infrastructure and infrastructure-related sectors. The scheme was launched in 2007 and has Rs 1,209 crores of assets under management (AUM) as on 31^st August 2023. The total expense ratio (TER) of the scheme is 2.23%. The scheme invests in a relatively concentrated portfolio of 35 – 40 companies within the infrastructure sector that offer secular growth opportunities and are cyclical. The scheme has delivered 8.1% CAGR returns since inception (as on 15^th September 2023) but has performed very strongly over the last 3 years (more than 30% CAGR returns). Click on this link, SBI Infrastructure Fund, to know the performance of the scheme, portfolio and other scheme-related information.

SBI Banking and Financial Services Fund

SBI Infrastructure Fund is a thematic fund which invests in the banking and financial services sectors. The scheme was launched in 2015 and has Rs 4,200 crores of assets under management (AUM) as on 31^st August 2023. The total expense ratio (TER) of the scheme is 1.93%. The scheme has a growth and quality orientation. It invests in companies with strong long-term earnings growth projections, large market size opportunities and the company’s capability to capture it. The scheme has delivered 13.1% CAGR returns since inception (as on 15^th September 2023). Click on this link, SBI Banking and Financial Services Fund, to know the performance of the scheme, portfolio and other scheme-related information.

Why invest in the Trinity?

• Focused Approach: A focused portfolio investing in a specific sector or theme with an aim to capture the opportunities within those sector/themes


• Opportunity to participate in emerging themes: These themes are likely to benefit from emerging opportunities in the global landscape, evolution in technology and India’s Growth Story


• Combo of 3: The fusion of these 3 funds will help to provide optimal earnings across the economic cycle, and any fluctuations in returns will be more likely to balance out in your favour over time.


• Part of Satellite portfolio: This can help in building a core-satellite structure in your portfolio with sector and thematic funds being the satellite part of the portfolio.

Investors should consult with their mutual fund distributors or financial advisors if SBI Magnum Global Fund, SBI Banking and Financial Services Fund and SBI Infrastructure Fund.