Individual sectors tend to outperform markets

MUMBAI: Individual sectors have outperformed the stock markets every year since 2001, according to a study. The sector that outperformed the markets has been different in different years. It was auto in one year or banks in another or metal or oil and gas. But gains made by that sector were far greater than the markets, the study said. The study done by Citigroup found that in 2001, it was the auto sector that scored highest gains and outsmarted the Nifty index for that year.

In 2002, it was energy sector, in 2003, it was metal and in 2004, it was real estate. Incidentally, the outperformance has almost always been by a wide margin. For instance, Nifty index went up by 55 per cent during 2007 while metal sector shares went up by a whopping 193 per cent in the same year.

In 2005, Nifty was up by 36 per cent while real estate shares were up by 289 per cent. Cashing in on the sectoral play, IDFC Mutual Fund which recently took over Standard Chartered Mutual Fund has decided to launch a scheme based on this very theme called IDFC Strategic Sector (50-50) Equity Fund. Under the scheme, 50 per cent of the funds will be invested in one sector while the remaining funds will be invested in a diversified portfolio.

IDFC Mutual Fund Investment Head Rajiv Anand said every year the sector that performs is different and the fund managers of the scheme will try to identify which sector is likely to dominate in that year and will invest in them. He said as per the Citigroup study, the gains made by even the second and third best performing sectors also were way ahead of gains made by the Nifty.