How different sectoral funds performed in different period?

The economy and the stock market are entwined and hence fluctuation in the economy get reflected in the performance of the equity market. In a typical scenario, there are broadly three phases of the economic cycle, a period of economic growth, followed by a period of slowing growth, and then a contraction. The cycle then repeats itself. Every phase of economic cycle has its own winners and losers in terms of sectors and accordingly, the stock market’s different sector indices generate returns.

Hence as an investor, if you have invested in the right sector, it will have a significant impact on the overall return on your portfolio. In the last three year and five years period, the performance differential between the best and worst sector is as big as 21.2 per cent on an annualized basis. In absolute terms, the difference is large at 78 per cent and 161 per cent for three years and five years, respectively.

Each year the leaders and the laggard sectors tend to be different and they can even change throughout the year due to the rotation of sectors. What is interesting is that in the long run of five years and 10 years on an average these sectors have generated a better return than leading equity indices like Nifty.

In the following five graphs, we will try to understand which sectors have performed in the shorter run and long run. We have taken the average performance of different mutual fund schemes in these sectors. 

IT sector (Technology) remains the best sector in the last 3 months. 

 In last one year too, the technology sector has outperformed other sectors, however, FMCG was the other sector that generated better returns. 

In three years’ time frame, the broader market has outperformed any other sector.

The better performance of the technology in the current period has helped it remain as a top performer. 

FMCG and pharma both are considered as defensive sectors and have remained the winners in the long run.