Also Read: Best Index Funds to invest in 2022
What are Sector Funds?
Sector Funds in simple terms invests in specific sectors as per the investment objective of the fund.
As an example, banking and financial services fund would invest only in banks and financial services companies. Pharma funds would invest in pharma or healthcare companies only.
Benefits of investing in Sector Funds
Here are the major benefits of investing in these funds.
#1 – These funds would invest only in specific sector. If you expect that a specific sector would do well due to various reasons, you can invest in those specific funds.
#2 – Sector funds are high risk, high return funds. As an example, during covid pandemic, every one expected technology companies would do well. In such case investing in some of the best technology funds could have been the best bet.
Who can invest in Sector Funds?
If you fall in any of the below categories, you can invest in these funds.
1) Investors who believe that specific sectors would do well can invest in these funds.
2) Investors who want to take high risk and willing to invest for short term to medium term to long term can invest in these funds. In case of downside in short to medium term (e.g. Pharma was under performer during 2017 to Mar-2020, however outperformed in 2020-2021), one should be willing to hold for few more years to get high returns.
Best Sector Mutual Funds to invest in 2022
Here is the list of Top Sector Funds to invest in 2022 in India.
#1 – SBI Banking and Financial Services Fund
#2 – Quant Infrastructure Fund
#3 – Nippon India Pharma Fund
#4 – Tata Digital India Fund
Top Sector Funds in 2022 – Performance & Risk Statistics
Now that we have seen the list of top sector mutual funds, let us check the fund performance and risk statistics.
#1 – SBI Banking and Financial Services Fund
Funds Investment Strategy
The scheme seeks to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in banking and financial services.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | SBI Banking and Fin Services Fund |
|---|---|
| Value Research Rating | 5 Star |
| 3 Years – SIP Returns | 16% |
| 5 Years – SIP Returns | 14% |
| 5 Years – Annualised Returns | 14% |
| AUM – Crores | 3,177 |
| Expense Ratio | 0.81% |
| Risk Grade | Below Avg |
| Return Grade | High |
| Beta | 0.89 |
| Alpha | 3.48 |
This fund has a low beta of 0.89. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has a high alpha of 3.48. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to benchmark.
Currently it invests 98% in equity and balance holds in cash.
Its top holdings are HDFC Bank, ICICI Bank, SBI, Axis Bank, HDFC, Bandhan Bank, Federal Bank, Credit Access Grameen Bank, Indusind Bank, BoB etc.,
From a 3 year rolling return perspective, this fund generated:
- Over 12% returns – 70% of the times
- 8% to 12% returns – 8% of the times
- < 8% returns – 20% of the times
- Negative returns – 2% of the times
From a 5 year rolling return perspective (to 2013 where direct funds data are available), this fund generated:
- Over 12% returns – 100% of the times
- 8% to 12% returns – Zero times
- < 8% returns – Zero times
- Negative returns – Zero times
This fund generated 14% annualized return since inception in 2013 (direct fund). Considering its outstanding performance in the category and low expense ratio, it is one of the Best Banking Sector Mutual Fund to invest in 2022.
#2 – Quant Infrastructure Fund
Funds Investment Strategy
The MF aims to invest predominantly in equity and equity related instruments of the companies in the infrastructure sector.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | Quant Infra Fund |
|---|---|
| Value Research Rating | 5 Star |
| 3 Years – SIP Returns | 58% |
| 5 Years – SIP Returns | 36% |
| 5 Years – Annualised Returns | 24% |
| AUM – Crores | 521 |
| Expense Ratio | 0.58% |
| Risk Grade | Avg |
| Return Grade | High |
| Beta | 0.73 |
| Alpha | 20.96 |
This fund has a beta of 0.73. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has a minimal alpha of 20.9. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to benchmark.
Currently it invests 93% in equity and balance holds in cash.
Its top holdings are Vedanta, Adani Enterprises, L&T, Adani Ports, Linde India, IRB Infra, Ultratech Cement, SBI, Tata communications etc.,
From a 3 year rolling return perspective, this fund generated:
- Over 12% returns – 41% of the times
- 8% to 12% returns – 17% of the times
- < 8% returns – 29% of the times
- Negative returns – 13% of the times
From a 5 year rolling return perspective (to 2013 where direct funds data are available), this fund generated:
- Over 12% returns – 97% of the times
- 8% to 12% returns –3% of the times
- < 8% returns – Zero times
- Negative returns – Zero times
This fund generated 17% annualized return since inception in 2013 (direct fund). Considering its superior performance in the category and high SIP returns, It is one of the Top Infrastructure Sector Funds to invest in 2022.
#3 – Nippon India Pharma Fund
Funds Investment Strategy
The fund seeks to generate consistent returns by investing in equity / equity related or fixed income securities of pharma and other associated companies.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | Nippon India Pharma Fund |
|---|---|
| Value Research Rating | NA |
| 3 Years – SIP Returns | 27% |
| 5 Years – SIP Returns | 23% |
| 5 Years – Annualised Returns | 18% |
| AUM – Crores | 4,932 |
| Expense Ratio | 0.88% |
| Risk Grade | NA |
| Return Grade | NA |
| Beta | 0.92 |
| Alpha | 5.50 |
This fund has a low beta of 0.92. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has an alpha of 5.5. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to benchmark.
Currently it invests 98% in equity and the balance is held in cash.
Its top holdings are Sun Pharma, Cipla, Divi Labs, Dr Reddy Labs, Narayana Hrudalaya, Lupin, Torrent Pharma, Aurobindo Pharma,
Apollo Hospitals, etc.
From a 3 year rolling return perspective, this fund generated:
- Over 12% returns – 68% of the times
- 8% to 12% returns – 2% of the times
- < 8% returns – 27% of the times
- Negative returns – 3% of the times
From a 5 year rolling return perspective (to 2013 where direct funds data are available), this fund generated:
- Over 12% returns – 100% of the times
- 8% to 12% returns – Zero times
- < 8% returns – Zero times
- Negative returns – Zero times
This fund generated 17% annualized return since inception in 2013 (direct fund). Considering its outstanding performance in the category and high returns, it It is one of the Best Pharma Sector Funds in 2022 in India.
Also Read: 5 Mutual Funds 10x returns in 10 years
#4 – Tata Digital Fund
Funds Investment Strategy
The scheme seeks to capitalize on the potential upside in the equity markets while attempting to limit the downside by dynamically managing the portfolio through investment in equity & equity related instruments and active use of debt, money market instruments and derivatives.
Funds Performance and Risk Statistics
| Performance & Risk Metrics | Tata Digital Fund |
|---|---|
| Value Research Rating | NA |
| 3 Years – SIP Returns | 44% |
| 5 Years – SIP Returns | 35% |
| 5 Years – Annualised Returns | 33% |
| AUM – Crores | 5,894 |
| Expense Ratio | 0.35% |
| Risk Grade | NA |
| Return Grade | NA |
| Beta | 0.93 |
| Alpha | 4.13 |
This fund has a low beta of 0.93. Beta refers to the volatility of the fund compared to its benchmark (which is 1). Any fund that has a beta of lower than 1 can be considered as less volatile compared to the benchmark.
This fund has an alpha of 4.13. Alpha is excess returns earned over the benchmark. Any fund that has alpha of more than zero can provide higher returns compared to benchmark.
Currently it invests 98% in equity and the balance is held in cash.
From a 3 year rolling return perspective, this fund generated:
- Over 12% returns – 97.8% of the times
- 8% to 12% returns – 2% of the times
- < 8% returns – 0.2% of the times
- Negative returns – Zero times
From a 5 year rolling return perspective (to 2013 where direct funds data are available), this fund generated:
- Over 12% returns – 100% of the times
- 8% to 12% returns – Zero times
- < 8% returns – Zero times
- Negative returns – Zero times
This fund generated 24% annualized return since inception in 2013 (direct fund). Considering its consistent performance in the category, low expense ratio and high SIP returns, it It is one of the Best Technology Sector Mutual Funds in India.
List of Sector Funds with annualized returns
| Mutual Fund Name | 1 Yr | 3 Yrs | 5 Yrs |
|---|---|---|---|
| SBI Banking and Fin Services Fund | 11% | 12% | 14% |
| Quant Infra Fund | 56% | 38% | 24% |
| Nippon India Pharma Fund | 7% | 25% | 18% |
| Tata Digital Fund | 36% | 34% | 33% |
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Hi Suresh,
Apart from FD and liquid funds please suggest if any 1-2 low risk funds for investing a period of 2-3 years with low risk and stable returns around 6-7%.
Currently debt funds are giving low returns. However, you can invest in ultra short term funds as interest rates would go up in next few months. You can choose ICICI Ultra short term fund or HDFC ultra short term fund.
Hi Suresh Sir,
If I have to make a choice between below funds for SIP investment, which would be most preferred from each category?
Large cap:
1. Axis bluechip fund
2. Mirae assette emerging equities fund
3.Canara robeco bluechip fund
Mid cap:
1. Kotak emerging equity
2. Invesco india
3. Axis midcap
4.Quant midcap
Smallcap
1. Axis small cap
2. SBI small cap
3.Nippon India small cap
4.Quant small cap
Please suggest any other category of fund where I can invest apart from these 3 categories.
How many funds I shall invest for medium to long investment horizon with aggressive approach.
I want to invest 30000 rs. per month across these funds.
I also holds NPS, LIC and PPF investments. Currently no contributiona made to these accounts from past 1 year.
Good to hear about you
Largecap – I prefer all 3
Midcap – I prefer axis and quant midcap
Smallcap – All are good, but I mostly prefer quant smallcap and SBI smallcap
You have enough funds in your category except for international exposure or flexicap funds. You can consider Motilal Oswal NASDAQ 100 Fund of Fund or MO S&P 500 fund. Currently due to global limit restrictions, these funds are not opened for new subscriptions, but you can add once they open in next couple of months.
In flexicap, you can add UTI flexicap and Parag Parikh flexicap fund
Thanks Suresh Sir for suggestions, very helpful. For tax savings purpose can I invest in ELSS as I am under high tax bracket. If so please suggest the fund.
Yes. You can consider consistent performing ELSS Funds. Refer this article if you want to filter them. https://myinvestmentideas.com/2022/04/best-elss-tax-saving-mutual-funds-to-invest-in-2022/