HSBC Financial Services Fund

HSBC Financial Services Fund delivered a 1Y SIP XIRR of 7.73%, notably below the thematic category average of 11.71%, indicating recent underperformance on the primary return metric. The 1Y rolling return mean of 10.38% suggests lump-sum investors have fared somewhat better over rolling windows. Calendar year returns show volatility, with a strong 23.19% in 2025 followed by a -1.59% start to 2026.

The fund's maximum drawdown of just -0.15% over 40 days with a 38-day recovery reflects remarkably low recent volatility, and only one drawdown event exceeding 10% has been recorded. However, the 1Y Calmar ratio of 0.719 indicates modest risk-adjusted returns relative to the drawdown experienced. Overall, the risk profile appears contained in the current period, though sector funds can experience sharper drawdowns in adverse cycles.

The portfolio is well-diversified across 35 holdings, with HDFC Bank (6.58%), Nippon Life India AMC (5.83%), and Shriram Finance (4.78%) as the top positions. Sector exposure is concentrated in Capital Markets (29.2%), Banks (28.0%), and Finance (19.4%), which together account for over 76% of the portfolio. This is expected for a financial services thematic fund, but it means performance is tightly linked to the financial sector cycle.

With a 1Y XIRR of 7.73% versus the category average of 11.71%, the fund currently trails its thematic peers. The lack of longer-horizon XIRR data for the fund makes it difficult to assess consistency over 3Y-10Y periods where the category has averaged 16.4%-17.5%. Investors should monitor whether the recent lag is a temporary phase or a persistent trend.

This fund suits investors with a high risk tolerance and a long time horizon of at least 5-7 years, given the cyclical nature of financial sector themes. It should be used as a satellite allocation within a diversified portfolio rather than a core holding. Investors comfortable with sector concentration and potential periods of underperformance versus diversified equity funds are best positioned to benefit.

• Low maximum drawdown of -0.15% with quick 38-day recovery indicates strong recent downside control
• Diversified portfolio of 35 holdings with no single stock exceeding 6.58% of NAV
• Low expense ratio of 0.52% for a thematic fund in the Direct plan

• 1Y SIP XIRR of 7.73% significantly trails the category average of 11.71%
• Heavy sector concentration with Capital Markets, Banks, and Finance comprising over 76% of the portfolio, exposing investors to financial sector cyclicality