Top 12 sectoral mutual funds with 12-30% returns in the past year; See list

Updated: 06 Dec 2022, 01:25 PM IST

Many sectoral funds have earned double the market returns in the past year, thus, leaving behind index funds, equity and debt funds.

Sectoral funds yield high returns compared to index, equity and debt mutual funds

Sectoral funds are in vogue considering the humongous returns these funds have earned in the past year. Be it in the PSU sector or the FMCG section or Commodities fund or those catering exclusively to the Transportation & Logistics sector or any other, sectoral funds have helped many investors create wealth in the recent past. Statistics reveal how the SBI PSU Fund – Growth delivered 30.30 per cent returns in one year as opposed to most other equity funds that could not even cross 15 per cent.

Sectoral FundsOne-year returns (in %)
SBI PSU Fund – Growth30.30
ICICI Prudential FMCG – Growth21.40
ICICI Prudential Commodities Fund – Reg Growth20.10
UTI Transportation and Logistics Fund – Growth 19.40
Nippon India Banking & Financial Services F-R-G17.60
Tata Infrastructure Fund – Reg – Growth16.30
Nippon India Power & Infra Fund – Reg – Growth15.30
SBI Infrastructure Fund – Growth13.80
Sundaram Financial Services Opportunities F-R-G13.50
Tata Banking and Financial Services Fund – Reg Growth12.50
UTI Banking and Financial Services Fund – Growth12.00
Aditya Birla Sun Life Infrastructure Fund – Growth12.00
Source: SMC

Now compare these with index funds that yield market-linked returns. Some index funds like the Motilal Oswal Nifty Bank Index Fund – Reg – G outperformed their equity and debt counterparts by earning 17.80 per cent returns though similar other index funds could yield returns at par with other equity funds in the market. The returns from investing in Nifty50 and S&P BSE Sensex indices were recorded as 7.40 per cent and 7.50 per cent returns. The following table highlights popular index funds along with their one-year returns, thus, explaining how the risk of parking money in a particular sector can pay off in the long run.

 Index Funds One-year returns (in %)
 Motilal Oswal Nifty Bank Index Fund – Reg – G17.80
 DSP Nifty 50 Equal Weight Index Fund – Reg – G10.90
 UTI Nifty 50 Index Fund – Growth8.50
 IDFC Nifty 50 Index Fund – Reg – Growth 8.50
ICICI Prudential S&P BSE Sensex Index Fund-R-G8.50
HDFC Index Fund - S&P BSE SENSEX Plan8.50
ICICI Prudential Nifty 50 Index Fund – Reg - Growth8.40
DSP Nifty 50 Index Fund - Reg - Growth8.40
HDFC Index Fund-NIFTY 50 Plan8.30
SBI Nifty Index Fund - Growth8.30
Nippon India Index Fund - S&P BSE Sensex Plan-R-G8.20
Source: SMC

Though sectoral funds can help you amass the much-needed returns, a lot depends on the sector you have put your money in. These funds are mostly cyclical, which means that they do not perform consistently but will benefit you with the growth of that sector only. Though sectoral funds allow you to invest in that sector sans the hassle of identifying one particular stock, putting your money can be risky and requires a lot of patience. This is because there is a persistent risk of that sector either not performing or taking too long to respond to market conditions. While investing in any sectoral fund, investors must be aware of the pain points in that sector. Moreover, they should be able to enter only when there is scope for the growth of that sector. The ability to identify which sector will do well comes from a lot of experience of dabbling in the markets, or else there is no way of getting the entry and exit points right.

Index funds are mutual funds that replicate the portfolio of an entire index like Nifty50. 
First Published: 06 Dec 2022, 01:25 PM IST