Technology, energy emerge as winning sectoral bets for MF investors

Mutual fund (MF) investors who like to take sectoral or thematic punts have bet the most on schemes that invest in the technology and energy sectors.

The two-year category average returns for various sectoral and thematic schemes have ranged between 25 per cent and 72 per cent on an annualised basis. Technology funds are at the upper end, while international funds at the lower end of the spectrum, data provided by Value Research shows.

Within the technology space, ICICI Prudential Technology Fund has delivered the best two-year annualised returns of 86 per cent. The scheme has beaten the BSE Teck index by a huge margin of nearly 30 percentage points. The fund’s performance has been driven by its huge overweight position on Infosys, whose stock price has jumped 2.7 times in the past two years.

Energy schemes have been the second-best performer with annualised returns of 62 per cent. DSP Natural Resources and New Energy Fund has been the top-performer with two-year returns of 64 per cent and the only other scheme in this category, Tata Resources & Energy, has given returns of 60 per cent. Both have benefited from a boom in the commodity cycle, which has boosted stocks in the metal and energy space.

Sectoral funds based on consumption and banking have underperformed over a two-year period with returns of just 36 per cent and 37 per cent, respectively. Pharma, which was the most sought-after sector in the immediate aftermath of Covid-19’s outbreak in 2020, too, has lagged over a two-year period with annualised returns of 40 per cent.

When it comes to theme-based investing, “value” has managed to deliver annualised returns of nearly 50 per cent over a two-year period. The dividend-yield theme is not far behind with returns of 47 per cent. Within this space, ICICI Prudential Commo­dities Fund, SBI Magnum COMMA Fund, and ICICI Prudential India Opportunities Fund have managed to deliver encouraging returns over a two-year period.

Investing in international funds created a lot of buzz. However, the category has failed to live up to its billing with two-year annualised returns of just 25 per cent. Over a two-year period, India is the best-performing major market globally. As a result, investors would have been better off investing in schemes that backed local companies.

The sharp underper­for­mance of China has impacted the returns of some schemes in this category. 

To be sure, the two-year returns for all schemes look elevated due to a low base effect. If one looks at the three-year performance, the returns are more modest for the pack, ranging between 6 per cent and 35 per cent on an annualised basis. Here again, technology tops the chart, followed by pharma, with returns of 35 per cent 24 per cent, respectively. Meanwhile, banking and PSU schemes are at the bottom with three-year annualised returns of just 6 per cent and 9.8 per cent, respectively.