According to reports from Dalal Street Investment Journal, five financial services mutual funds have emerged as the best performers based on their one-year returns as of July 7, 2026. Quant BFSI Fund led the pack with a remarkable 20.43% return, followed by DSP Banking & Financial Services Fund at 11.42%, Groww Banking & Financial Services Fund at 8.53%, HSBC Financial Services Fund at 8.31%, and ITI Banking and Financial Services Fund at 7.60%. These sectoral funds invest primarily in banks, non-banking financial companies (NBFCs), insurance companies, asset management companies and other financial institutions.
As reported by Dalal Street Investment Journal, sectoral funds are mutual fund schemes that invest in a specific segment of the market, allowing investors to gain exposure to sectors believed to have long-term growth potential. Under SEBI's guidelines, sectoral funds are required to invest at least 80% of their assets in companies belonging to a particular sector. Financial services funds primarily invest in banks, NBFCs, insurance companies, asset management companies and other financial institutions, with their performance influenced by interest rate movements, regulatory changes and the overall health of the banking industry.
According to the report, India's mutual fund industry has continued to attract strong investor interest as more retail investors turn to equity markets through systematic investments. The growing participation has made mutual funds one of the preferred investment avenues, with domestic inflows playing an increasingly important role in the equity market. Financial services funds benefit from India's banking and credit growth story, as the financial sector plays a key role in credit growth, economic activity and capital markets.
As noted in the Dalal Street Investment Journal report, investors should be aware that financial services funds are sectoral mutual funds and generally carry higher risk than diversified equity schemes. Their returns depend largely on the performance of the banking and financial services sector, making them suitable for investors with a higher risk appetite and a long-term investment horizon. The concentrated portfolio in a single sector means their performance is influenced by sector-specific factors including interest rate movements and regulatory changes.
