The Cycle Advantage: ICICI Prudential Business Cycle Fund’s Five-Year Journey

ICICI Prudential Business Cycle Fund (the Scheme), an open-ended equity scheme following a business-cycle-based investing theme, has completed five years since inception, marked by consistent performance across varying market conditions.

Launched on January 18, 2021, the Scheme aims to opportunistically invest across sectors and themes based on the prevailing stage of the business cycle, with the objective of generating long-term capital appreciation. The investment approach is rooted in identifying macroeconomic trends and dynamically allocating capital to sectors positioned to benefit from different phases of the economic cycle.

A lump sum investment of Rs 1 lakh at the time of inception (January 18, 2021), as of January 31, 2026, would be approximately worth Rs 2.51 lakh, i.e. a CAGR of 20.06 per cent. A similar investment in the Scheme benchmark (Nifty 500 TRI) would have yielded Rs 2.06 lakh, i.e. a CAGR of 15.47 per cent.

In terms of SIP performance, a monthly investment of Rs 10,000 via SIP since the inception, which would amount to a total investment of Rs 6.10 lakh, would have grown to approximately Rs 9.74 lakh as of January 31, 2026, i.e. a CAGR of 18.47 per cent. A similar investment in the Scheme’s benchmark would have yielded a CAGR of 13.11 per cent.

The returns are calculated by the XIRR approach, assuming investment of Rs 10,000 on the first working day of every month. XIRR helps in calculating return on investments given an initial and final value and a series of cash inflows and outflows with the correct allowance for the time impact of the transactions.

Over the five-year period since launch, the fund has grown reasonably, reflecting the effectiveness of its business-cycle-driven allocation strategy across phases of recovery, expansion and slowdown.

The Scheme follows a top-down investment approach, guided by a range of macroeconomic indicators such as growth trends, inflation, interest rates, fiscal dynamics and global economic conditions. Based on the assessment of the prevailing business cycle, the AMC identifies suitable sectors and themes, following which stock selection is undertaken within those segments.

S Naren, ED & CIO, ICICI Prudential AMC, said, ‘A large part of India’s economy is inherently cyclical, and equity leadership tends to shift as the business cycle evolves. Our focus is on understanding where the Indian and global economy are positioned in the cycle and aligning sector exposure accordingly over a three-to-four-year horizon. The business-cycle approach emphasises identifying inflection points where sentiment and fundamentals diverge. History shows that disciplined, data-driven calls at such turning points can be rewarding for long-term investors.’

The Scheme follows a cycle-aware approach, positioning the portfolio to benefit from shifts in the domestic and global business cycle while maintaining a relatively high-conviction structure. As of January 31, 2026, the portfolio is predominantly tilted towards domestic-facing sectors*, with close to 80 per cent of assets aligned to areas expected to benefit from improving economic activity. Financials form the core allocation, supported by exposure to automobiles, construction and select industrial segments, while maintaining tactical cash levels for flexibility. This positioning reflects a focus on sectors where earnings recovery, balance-sheet improvement or structural tailwinds are not yet fully reflected in market valuations, enabling the Scheme to seek alpha across varying market conditions. The portfolio positioning remains dynamic and is reviewed periodically in line with evolving macroeconomic conditions.

ICICI Prudential Business Cycle Fund is suitable for investors seeking long-term wealth creation and who are comfortable with equity-market volatility, while looking to benefit from a disciplined approach to navigating business cycles through active sector allocation.

Disclaimer: The article is for informational purposes only and not investment advice.