Sector funds beat diversified peers in 10-year SIP returns

Systematic investment plans (SIPs) in sector and thematic funds have fared far better than that in diversified equity mutual funds over a 10-year period. A SIP of Rs 10,000 per month in five sector funds vis a vis the top fi ve diversifi ed equity mutual funds (by AUM) over 10 years would have made investors richer by Rs 13.71 lakh.

“A lot of these defensive sectoral funds and themes like pharma, FMCG and MNC benefi tted from volatility globally between 2008 and 2015. At such times, cash rich companies and low-debt MNCs tend to outperform,” said Vidya Bala, head of research, Fundsindia.com. Bala, however, advises against aggressively betting on these schemes now and suggests investing in more specifi c and beaten-down themes.

Bala advises investors to have a maximum exposure of 10-15% to sectoral funds/themes. “Sectoral funds take concentrated bets and if you get the cycle wrong, you could be a loser,” says Rupesh Bhansali, head (distribution) at GEPL Capital.