NFO Insight: Can Motilal Oswal Services Fund help you gain stability and long-term growth potential?
Motilal Oswal Mutual Fund
's latest
new fund offer
of
Motilal Oswal Services Fund
is open for subscription and will close on June 3. The fund is an open-ended equity scheme investing in the services sector
The scheme will open for continuous sale and repurchase on June 16. Motilal Oswal
Services Fund
aims to generate long-term capital appreciation by investing in companies that derive the majority of their income from businesses operating in the services sector of the economy.
CEO comment on launch
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'India's services sector has consistently demonstrated strong and resilient growth, emerging as a key driver of the country's economic development. With its rising contribution to GDP, robust export potential, and growing digital and consumer-driven demand, we believe the sector may offer compelling long-term investment opportunities. Our new
Sectoral fund
is designed to tap into this structural growth story and enable investors to gain exposure to the services-led transformation of India's economy,' said Prateek Agrawal, MD and CEO, Motilal Oswal Asset Management Company.
Fund manager's take
'Services sector encompasses a wide range of industries—benefiting from rising incomes, urbanization and digital adoption. With structural tailwinds and improving export competitiveness, we see long-term potential across this sector. The fund will be benchmarked against
Nifty Services Sector Total Return
Index (TRI) which has shown an upward trend over the 11-year,' said
Bhalachandra Shinde
, Associate Fund Manager, Motilal Oswal Mutual Fund.
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'From an initial level around 1000 in April 2014, the index has steadily increased, reaching a level of 4518 by April 2025. Our investment approach will focus on identifying quality businesses with scalable models and strong fundamentals that are well-positioned to benefit from this sector,' he added.
Experts take on new launch
Experts typically ask investors to avoid investing in NFOs unless they offer something unique. The uniqueness could be that the scheme is offering an investment option that is not available in the market or offering something extra to an existing option. Otherwise, the experts believe investors are better off with an existing scheme with a long performance record. This is because you have some historical data to base your investment decision. You don't have any data when it comes to new offerings.
According to an expert, the fund being a sectoral or thematic fund is unique in its way that unlike other thematic/sectorial funds, it is not concentrated in a single category but diversified across a broad range of industries, such as the infrastructure theme.
Cautioning the investors about the fund or sector/theme, Arjun Guha Thakurta, Executive Director, Anand Rathi Wealth Limited recommends that investors should avoid investing in this sector or theme, 'as we have not seen much existing funds in this theme to understand the theme's performance across different market cycles. Additionally, thematic/sectoral funds tend to undergo cyclical performance.'
Another expert, post sharing India's services growth mentions that as we have not seen much existing funds in this theme to understand the theme's performance across different market cycles. Additionally, thematic/sectoral funds tend to undergo cyclical performance.
'As a smart investor, if you believe in India's growth story then service sector stocks should be a part of your core portfolio. So yes, market corrections should be seen as an opportunity to invest in promising service sector companies,' said Shruti Jain, Chief Strategy Officer, Arihant Capital Markets
The scheme will be benchmarked against Nifty Services Sector Total Return Index and will be managed by Bhalachandra Shinde, Ajay Khandelwal, Atul Mehra, Rakesh Shetty, and Sunil Sawant.
The scheme aims to generate long-term capital appreciation by investing in equity or equity related investments of companies that are engaged directly or indirectly or expected to benefit from the growth and development of the services sector in India.
Emerging sector
According to MOAMCs internal research, India's services sector has emerged as the most consistent and resilient contributor to the country's Gross Value Added (GVA), reflecting stable performance. Between FY23 and FY25, the sector achieved growth of 8.3%, underpinned by a surge in services exports, which accelerated to 12.8% in April–November FY25 from 5.7% in FY24. The sector's significance is further highlighted by its massive 109-fold increase in contribution to total GVA since FY14, according to a press release by the fund house.
As a share of total GVA, the sector grew from 52% in FY16 to 55% in FY24, peaking at 56% in FY23. This highlights the services sector's growing role in India's economic output and its contribution to employment, currently supporting nearly 30% of the workforce. On the global stage, India ranks 7th in services exports, with 4.3% share. Notably, the sector has remained in the expansionary zone for 41 consecutive months since August 2021, underscoring its stability and long-term growth potential, the release said.
The minimum investment amount for lumpsum is Rs 500 and in multiples of Re 1 thereafter. For monthly SIP, the minimum investment amount is Rs 500 and in multiples of Re 1 thereafter with minimum 12 installments.
The scheme will allocate 80-100% in equity and equity related instruments of companies which derive a majority of their income from business in the services sector of the economy, 0-20% in equity and equity related instruments of other than services sector companies and overseas securities, 0-20% in debt and money market instruments (including cash and cash equivalents), 0-10% in units of REITs and InvITS, and 0-5% in units of
mutual funds
.
Should one allocate?
Based on the investment pattern of the fund, Thakurta firmly recommends investors to avoid investing in sectoral/thematic funds as these tend to undergo cyclical performance as they are highly concentrated in only a single category of industries.
He instead recommends investors to invest in diversified equity funds, such as market cap-based funds and strategy-based funds, such as value, contra & focused, which give exposure across the range of sectors & categories and help to ride across the market cycles.
However, Jain recommends that the service sector should have a significant allocation to every investor's portfolio who is betting on India but the actual allocation would depend on your risk profile, and other factors as for any equity investment, one should have a horizon of 6-10 years to mitigate the volatility and get real benefit.
One should wait for at least 3-5 years to assess the performance of a service sector based fund before investing but investing in an old fund with a proven track record is a better choice than picking a
NFO
, especially if a similar fund is there in the market and if you invest in a diversified fund, it will automatically have a good percent of the portfolio invested into service sector stocks, considering how these companies have shown strong growth in last two decades said Jain.
The scheme is suitable for investors who are seeking capital appreciation over the long term and investing predominantly in equities and equity related instruments of companies engaged in the services sector of the economy.
Apart from Motilal Oswal Services Fund, there are two other funds based on this sector who have a track record of being in the market in the last five years. ICICI Prudential Exports & Services Fund has offered 28.66% return in the last five years and Sundaram Services Fund offered 29.68% return in the same time period. In the last one year, the schemes have offered 14.26% and 19.17% respectively.
With two funds available for investment based on the service sector and this new NFO, Thakurta believes that the sector is expected to perform well and remain a structural growth engine, and emerge as a key driver of both domestic consumption and exports.
'With rising urbanization, digital penetration, and formalization, sub-sectors like financial services, healthcare, IT, telecom, and logistics are poised for multi-year growth. However, based on this, investing in a single sector is not recommended as it will increase the concentration risk associated with the performance of a single sector,' he adds.
One should always invest based on their risk appetite, investment horizon, and goals.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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