SBI Mutual Fund launches quality-focused equity fund, bets on durability amid market volatility

While the fund will remain diversified, sector exposure is expected to reflect the nature of quality businesses. “You would have capital goods companies, pharma, IT, and consumer goods having a relatively higher share,” Upadhyay said, while noting that some industries may see lower allocation for example companies where execution is very important.

• SBI Mutual Fund launches SBI Quality Fund NFO from Jan 28 to Feb 11, 2026
• Fund targets resilient, well-governed companies with lower volatility
• Benchmark is Nifty 200 Quality 30 Index, focusing on durable fundamentals

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SBI Mutual Fund has announced the NFO launch for its SBI Quality Fund, an open-ended equity scheme focused on quality investing, as it looks to offer investors exposure to businesses with durable fundamentals and lower volatility across market cycles.

The decision to introduce a quality-focused strategy has been in the works for several years, according to the management. “We have been thinking of launching this quality factor for a long time, and we were working on it,” SBI MF's DP Singh said at a media event to launch the NFO, adding that the fund is not intended to replicate existing products but is a unique new offering. The New Fund Offer (NFO) opens on January 28, 2026, and closes on February 11, 2026.

The fund is aimed at investors seeking stability during uncertain market phases, where differentiation between businesses becomes important.  The portfolio, he added, will focus on resilient businesses with clean governance. “Resilient companies, growth companies, quality companies, high-quality management without any controversies, those are the stocks which we look at," Singh explained.

Explaining the investment philosophy, Fund manager Anup Upadhyay described quality investing as an approach that prioritises durability over short-term performance.  Such companies, according to him, are able to perform consistently across economic conditions. “One looks for companies that are very durable, able to ride across adverse economic conditions and good economic conditions, and are very profitable compared to the average company in the market.”

The SBI Quality Fund is benchmarked against the Nifty 200 Quality 30 Index. “This strategy has delivered strong returns and for the last 20 years has delivered 93% more profits than an investor in the Nifty 50 would have earned,” he said. He also highlighted its downside protection characteristics. “It delivers a relatively better peace of mind. It suffers from lower drawdowns and lower volatility.” Referring to past market corrections, he noted that “during the global financial crisis, the Nifty 200 fell by around 63%, whereas the quality index fell by only around 54%, and during the COVID crash, the Nifty 200 fell by 37%, while the quality index fell by only around 28%.”

On the timing of the launch, Upadhyay said quality investing has underperformed in recent years, reflecting the cyclical nature of investment styles. “Quality factor has underperformed over the last four years, and in the past we have seen that the performance of quality and value are cyclical,” he said, describing quality and value as opposing poles that alternate leadership. “When value tends to outperform, quality tends to underperform,” he said, adding that “it’s quite likely that for the next few years you would see quality staging a comeback.”

The fund will be actively managed and will draw from SBI Mutual Fund’s internal research universe of around 450 stocks, covered by a team of about 25 equity analysts. Stock selection will begin with quantitative filters. “We will first screen stocks for high return on capital, low debt, stable earnings profile, and decent earnings growth,” Upadhyay said. Stocks that pass these filters will then be assessed for the strength of their economic moats and classified into four categories.

“Companies that are widening their moat, quality at reasonable price, caterpillars, and mean reversals,” he said. Valuation discipline, the team emphasised, will remain central. “A good company is not always a good stock. If the stock price has gone up a lot, it may no longer be a good stock,” Dinesh Balachandran, Head of Investment at SBI MF explained, adding that “we won’t buy a stock simply because it is cheap, and we won’t buy companies that are growing fast by risking their balance sheet.”

While the fund will remain diversified, sector exposure is expected to reflect the nature of quality businesses. “You would have capital goods companies, pharma, IT, and consumer goods having a relatively higher share,” Upadhyay said, while noting that some industries may see lower allocation for example companies where execution is very important.