After examining the past one-year performance of mutual funds, one can discern that the financial services and FMCG (fast moving consumer goods) funds gave better performance than most other funds arcoss categories.
The financial services schemes gave a category average performance of 11.29 percent return in the past one year whereas FMCG gave an average of 15.86 percent. It is important to note that these are the average performance of these categories. The top performing funds gave even higher performances.
The top performing financial services funds delivered a performance of 12.90 percent and 16.70 percent, respectively.
|Sector||Category average||Top performer|
(Source: Morning Star, 1-year returns as on April 16, 2023)
At the same time, other funds that gave poor performance include technology funds and value funds. The former delivered -14.56 percent returns, while value funds gave a return of 2.60 percent.
|Sectoral funds||1-year-return (%)|
|Nippon India Power & Infra Fund||14.06|
|Kotak Infrastructure and Economic Reform Fund||17.59|
|ICICI Prudential FMCG Fund||15.69|
(Source AMFI, regular returns as on April 13)
There were some fund schemes that gave more than 14 percent return in the past one year. The table above shows that Nippon India Power & Infra Fund gave a return of 14.06%, Kotak Infrastructure and Economic Reform Fund gave 17.59% return and ICICI Prudential FMCG Fund gave 15.69% return.
However, it doesn’t necessarily mean that investors should place their bets on thematic funds. Experts advise that it is not recommended to invest large sums into thematic mutual funds.
“It is very difficult to predict which sector will outperform. They are easy to analyse in the hindsight but difficult to predict. The sector rotation keeps happening, and it is more like a game of musical chairs wherein investors should not get caught,” says CFA Ravi Saraogi, SEBI-registered investment advisor and Co-founder of Samsthiti Advisors.
He further says that investors should not invest more than 10 percent of their portfolio in one or maximum two thematic funds.
Sridharan Sundaram, Founder of Wealth Ladder Direct, says he doesn’t recommend sectoral funds in general but one can still invest in banking and financial services funds since they tend to do well during any period of time. “FMCG funds have done well in the past one year and they are likely to do well this year as well since this is an election year and the rural consumption would on a higher side,” says Sridharan.