At a time when the benchmark Sensex is scaling new peaks, most sectoral funds have underperformed the index over the past one year, banking sector funds being the only exception.
Other sectoral funds such as pharma, technology and FMCG have recorded an average gain of 70.55 per cent, 67.63 per cent and 59.46 per cent, respectively, in the past one-year against 72.04 per cent return on Sensex in the same period.
The permutation-combination of constituent stocks of different funds is one of the reasons for the difference in performances between various sectoral funds and the benchmark index.
“The difference in the performance of the benchmark index and sectoral indices is largely due to the varied composition of these indices. While the Sensex comprises the large-cap companies across sectors, sectoral indices comprise companies from a specific industry,” said Jagannadham Thunuguntla, equity head at SMC Capital. Advisors are advising to opt for diversified funds having orientation towards large-cap stocks with an investment horizon of at least 2 to 3 years.
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