Business cycle funds: all 10 with 3 years beat Nifty 500

A theme with no fixed sector

Most thematic funds are tied to a slice of the economy: banks, pharma, consumption. A business cycle fund is tied to a process instead. The manager decides which phase of the economic cycle India is in, and moves money towards the sectors expected to do well in it. The SEBI rule is the same as for any sectoral or thematic fund, at least 80% in the theme, but here the theme can include almost anything.

That makes it a different bet from a defence or IT fund. You are not betting on a sector; you are betting on one manager's sector timing.

19 funds, ₹42,278 crore

We found 19 open-ended business cycle funds with a Direct Growth plan, all in SEBI's sectoral/thematic category. Ten have a three-year record. Assets are AMFI's average for July to September 2026, the expense ratio is the Direct plan's latest disclosure, and returns run to 9 October 2026 (8 October for ICICI Prudential, its latest NAV in our data). A year or more is a yearly rate.

"Since" is the first NAV in our data. HSBC's fund came over from L&T Mutual Fund when HSBC took over its schemes; our record starts in November 2022, at a NAV of ₹26.41, so the fund is older than it looks here.

The nine younger funds hold the other ₹9,634 crore:

What stands out

Every fund with three years beat the broad market. All ten are ahead of the Nifty 500 TRI, though Tata's lead is 0.06 points. The median, 12.41% a year, is also ahead of the 11.50% median for flexi-cap funds over the same three years. The three funds with five years beat the index by 1.9 to 5.3 points a year.

The last year was flat, but flat beat the index. The median one-year return is 0.04%, against −4.87% for the Nifty 500 TRI. Sixteen of 18 funds with a year's record were ahead; the two behind were ICICI Prudential and Bandhan.

One fund holds 37% of the money. ICICI Prudential's ₹15,842 crore is more than four times Kotak's ₹3,441 crore. Seven of the 19 launched in 2024 alone.

What they hold

On the latest disclosed portfolios (30 September 2026, or 31 August for Bandhan, Edelweiss and HSBC), the stocks held most widely are ICICI Bank in 14 of the 19 funds, Reliance Industries in 13, HDFC Bank in 12, Axis Bank and Eternal in 11, and Larsen & Toubro in 10.

Banks are the largest industry in 15 of the 18 funds whose disclosures tag industries (quant's does not). The average bank weight is 15.8%, from 3.9% in Sundaram's fund to 26.2% in DSP's. For comparison, flexi-cap funds average 17.2% in banks, and banks are the largest industry in 35 of the 46. Our post on bank stocks in mutual fund portfolios has the wider picture.

The exceptions show what the theme allows. Edelweiss's largest industry is pharma at 14.0%, Sundaram's is electrical equipment at 13.4%, and Motilal Oswal's is auto components at 10.0%.

How to read it

These funds move with the market. Against the Nifty 500 TRI, the ten older funds have a beta of 0.89 to 1.20 and an R² of 0.82 to 0.96. Most of what they do is explained by the broad market, which is what you would expect of a portfolio whose sector mix sits close to a flexi-cap fund's.

Trading styles differ a lot. Reported portfolio turnover runs from 24% at Kotak, 25% at Tata and 26% at Invesco India to 167% at Edelweiss and Motilal Oswal and 633% at quant. Some managers rotate a little; some rotate constantly. Turnover is a cost paid inside the NAV.

Three years is one stretch of one cycle. The ten-fund record covers October 2023 to October 2026. A fund built to time the cycle can only really be judged across a full one, and none of these has a long enough record here to show that.

What the numbers do not tell you

Whether the managers' calls on the cycle caused the returns, or whether broad stock-picking did, the figures cannot separate. Holdings are a month-end snapshot and change fast in high-turnover funds. Expense ratios and assets are as disclosed to AMFI and change over time. The index row is our total-return reconstruction from NSE's levels and dividend yields.

None of this is a recommendation to buy or sell any fund, and past returns do not predict future ones. If you are deciding between a theme and a diversified fund, start with sectoral and thematic funds: reward, risk or marketing?, and see the ICICI Prudential fund-house page for the largest fund's siblings.