In a remarkable performance, 101 out of 310 equity mutual funds in India have doubled investors' money over a five-year period, excluding international funds. This translates to nearly one in three funds achieving at least a 100% absolute return, highlighting the strength of sectoral rallies in the market.
The top performers over five years include ICICI Prudential Infrastructure Fund with a 188% return, SBI PSU Fund at 183%, and LIC MF Infrastructure Fund also at 183%. Other notable funds are Aditya Birla Sun Life PSU Equity Fund with 179% and DSP India TIGER Fund with 176.51%. The Motilal Oswal Midcap Fund, with a 172% return, stands out as the highest-ranked diversified mid-cap offering.
In the three-year rankings, HDFC Defence Fund led with a 174.11% return, turning a Rs 1 lakh investment into approximately Rs 2.74 lakh. Bandhan Small Cap Fund followed with a 106% return, while Quant BFSI Fund and LIC MF Infrastructure Fund delivered 101.73% and 100.24%, respectively.
“Sector themes tend to move in cycles and capturing superior returns requires getting both the entry and exit timing right, which is difficult for most investors.”
Feroze Azeez, Joint CEO at Anand Rathi Wealth
Despite these impressive long-term figures, recent returns have been weaker. Over the past two years, ICICI Prudential Infrastructure Fund returned only 5.28%, and SBI PSU Fund gained a mere 0.75%. Aditya Birla Sun Life PSU Equity Fund even saw a decline of 0.93%.
Feroze Azeez, Joint CEO at Anand Rathi Wealth, emphasizes the cyclical nature of sector themes, noting that superior returns require precise timing of entry and exit, which is challenging for most investors. He attributes past outperformance to policy support and earnings growth, particularly in defence and infrastructure sectors.
Background
The mutual fund sector in India has seen significant growth, driven by policy support and government expenditure in key areas such as defence and infrastructure. This has led to substantial returns for investors, but recent market corrections highlight the importance of strategic diversification.
Looking ahead, while healthcare and infrastructure sectors may continue to show growth potential, the cyclical nature of these markets suggests that investors should maintain a medium-to-long-term perspective. Diversification remains key to navigating potential market volatility.
