Top 5 best performing mutual funds (Sector based) to invest for 2013

Top 5 best performing mutual funds in India (Sector based) to invest for the year 2013

Overview – Top 5 best performing mutual funds (Sector based) to invest for 2013

Do sector based mutual funds still attract investors? We have earlier analyzed some of the best performing mutual funds in sector based category and planned to review them after 3 months. This article talks about our updated view on this sector based mutual funds.

What are sector based mutual funds:

Sector based mutual funds invest money in specific sectors equity stocks only. For e.g. FMCG sector mutual funds invest money only in FMCG sector companies. There are various sector based mutual funds like FMCG, Pharma, Technology and Banking and financial services.

Why investors are not investing in sector based mutual funds:

These mutual funds would concentrate mostly on a particular sector. The returns from this sector would depend directly on the industry performance. Say technology sector mutual funds invest in technology sector like IT/Software/ITES companies. Currently there is downtrend in this industry performance in the last 2 to 3 years in India. Hence its performance is directly impacting the performance of the technology based mutual funds. Technology sector mutual funds gave an average of 6% per annum over the last 3 years which is far below the bank fixed deposits.

Analysis on best performing mutual funds in India (Sector based)

Now let us study the performance of 4 categories of sector based mutual funds, banking and finance sector, Technology sector, Pharma sector and FMCG Sector.

  1. Banking and finance sector based mutual funds: This sector based funds have still under performed and have provided an average annual returns from 9% to 11% in the last 3 years. This sector would continue to perform in similar lines and may provide the returns above the bank fixed deposits. Invest in these sectors based mutual funds if you are expecting returns above bank fixed deposits.
  2. Technology sector based mutual funds: Technology funds has been underperforming in the last 3 years. Except for ICICI Prutech which has provided returns of 13% in the last 3 years, other mutual fund schemes has provide only 6% annualized returns which are fall below the bank fixed deposits. With the current downtrend in the technology stocks and the no growth seen in next 1-2 years, we would believe that this sector would under perform in 2013 also and request investors to stay away from this Technology sector based mutual funds.
  3. Pharma sector based mutual funds : This sector based mutual funds are providing good returns ranging between 16% to 19% annualised returns in the last 3 years. Due to growing demand in healthcare and pharma, this sector would continue to outperform in future. Investor can invest in this sector based mutual funds. Top-3 mutual funds in this category is given below.
  4. FMCG sector based mutual funds: This is one of my favorite and best performing mutual funds categories.
  • As indicated in our previous article, FMCG sector is providing excellent returns in the last 3 years ranging from 25% to 32% annualized returns.
  • We re-iterated this in our “10 ways to double your money” article, that this is the only best performing mutual funds option where the money is expected to double in 3 years by investing in FMCG sector based mutual funds.
  • However past performance may or may not repeat, but we still continue to believe that this sector would provide good returns comparing to other sector mutual funds.
  • Top-2 mutual funds in this sector is given below.

Top 5 best performing mutual funds in India (Sector based) to invest for 2013

Conclusion: Sector based mutual funds has not gained confidence from the investors. Technology based mutual funds are showing continued underperformance. Banking and financial services mutual funds are performing good comparing to returns from bank fixed deposits. Pharma sector is providing good performance and FMCG sector funds are showing outstanding performance.  Invest in these top-5 mutual funds (Top-3 in Pharma and Top-2 in FMCG) to get highest returns.

Readers, are you investing in such sector based best performing mutual funds in India? Please give your comments

If you found this article is good, share the link in Twitter/Face book. The links are provided below.

Suresh
Myinvestmentideas.com

Disclaimer: Mutual fund investments are risky. Past performance, may or may not repeat in future. Please consult your financial planning advisor before you take an investment decision.

12 Comments

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  1. Thank Suresh the article was really helpful, as of now at this current period I am about to start to invest somewhere, can please guide as per current market status which would be the best sector or scheme, I can invest 10000-15000/mo

    Thanks, Jay

    1. Jay, You can invest in pharma and Banking sectors. You can choose reliance pharma and ICICI Pru banking and fin services funds. These are high risk high return funds.

      1. Thank you for your reply Suresh sir, looking forward to it
        Jay

  2. Dear Suresh, If sector based MF are highly risk then what would be the better option in MF to invest money. Please help me regarding this.

    1. In sector funds you can opt for Banking or Pharma fund. Alternatively you can invest in mid-cap/small cap funds which are high risk high return funds

  3. Hi.can any one help me about the mutual fund. actually i don’t have any knowledge about it.i want to invest for long term with the amount of Rs 500-1000/ per month in a mutual fund.so plz plz plz give me information that which funds would be better for invest and can i get good return.

    1. You can review the following funds. Quantum Equity fund, ICICI Focused blue chip fund, Birla SL Front line, HDFC Top-200 fund etc.

  4. Thanks for the recommendation, Suresh.

    I'm planning to go for pharma sector MF from SBI in the next month. This article strengthened the decision.

    I've one doubt though. If pharma is predicted to be so profitable, how come only three MF's available? Why rest of the AMC's not coming up with their own MF.

    1. Roshni, Sector based funds are high risk. Observe infra funds or IT Funds or banking funds. Several funds have underperformed and provided negative returns. People pulled their money due to negative returns. FMCG and Pharma looks good sectors now, but they are high risk as they too can slowdown at one point of time.

  5. Hi ,suresh first of all thanks for information however I want to know for long term in sector based fund which fund I should go for second it seems from pharma nd FMCG sector based funds that one year hold is ok for these funds to have maximum returns  rather than holding for 2 or 3 years,kindly pls help….

    1. Rajesh, Sector based fund, do not invest for too long. The sector may perform better now, but may be under performer, hence you should invest for short to medium term. In my opinion, both FMCG and Pharma are doing good, but for medium term, Pharma would definitely grow and you may not see any downside.

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