Performance swings of sectoral funds

In the past six months, the markets experienced both upswings and downslides. The roller coaster ride has triggered many investors to look at all the potential opportunities to reap returns.

With India's consumption theme trending, the FMCG stocks are seen surging and this has in-turn made investor curious about sectoral funds. To do a fact-checking on the same, we analysed the performance of various sectoral fund categories.

Sectoral funds follow a specific theme, that is, these funds invest in the stocks from a specific sector. These funds are highly concentrated and are risky in nature. So investors considering these funds for riding market volatility should consider the risk also.

Going ahead, we have analysed the categories in the sectoral funds like Sectoral-Banking, Sectoral-Infrastructure, Sectoral-Pharma, Sectoral-IT etc. With the analysis of trailing returns, we have seen that there are many swings in the performances of these categories.

In each trench of the market slide, the categories have behaved differently. In the last six months no single category has been managed to lead the returns chart constantly. In the latest six months, IT sector funds have garnered great returns to the investors. This was mainly due to the rupee depreciation which has made the sector very attractive. Going ahead, in the past one and three months period, the banking sector funds are leading the returns chart with the revival in the PSU banks.

Sectoral funds form a good option with prospects of diversification, but due to its high-risk nature, investors should always keep a lower exposure towards these funds.