Business cycle mutual funds have delivered benchmark-beating returns amid market volatility, with the category outperforming the Nifty-500 over one and two years.

The thematic funds focused on the business cycle of mutual funds have come in handy during the current volatile times, delivering benchmark-beating returns.

In the last year, business cycle funds have delivered an average return of 3.15 per cent, compared with Nifty-500’s 0.85 per cent. Similarly, over two years, this ‘category’s average return was 3.29 per cent, against 2.42 per cent for the benchmark index.

Top funds deliver stronger returns

Mahindra Manulife Business Cycle fund delivered a return of 8.30 per cent in one year and 5.75 per cent in 2 years, while Kotak Business Cycle delivered 5.55 per cent and 7.36 per cent in the same period. ICICI Pru MF, the largest in the category with AUM at ₹9,663 crore, has delivered returns of 4 per cent and 6 per cent in the same period.

The asset under management of 11 funds in this category has jumped 26 per cent to ₹32,459 crore (₹25,776 crore) as of May-end.

Flexibility helps funds navigate market cycles

Unlike sectoral or thematic funds that concentrate investments in a single theme, Business Cycle Funds have the flexibility to dynamically allocate capital across sectors and industries expected to benefit at different stages of the economic cycle.

DD Sharma, MD, MF King, said that quartile rankings are particularly relevant in the Business Cycle Fund category, where success depends on timely sector allocation, portfolio agility, and disciplined stock selection.

The performance underscores the fund management team’s ability to dynamically position the portfolio across sectors expected to benefit at different stages of the economic cycle, he added.

Economic growth supports category performance

The category has benefited from India’s ongoing economic expansion, manufacturing push, infrastructure investments and increasing domestic consumption.

Shreya Kulkarni, an independent Mumbai-based MF Distributor, said the fund manager actively adjusts sector allocations as industries move through different phases of the business cycle, supported by disciplined stock selection.

For investors with a relatively higher risk appetite, this category can serve as an effective diversified allocation to capture opportunities across evolving market conditions, subject to their investment objectives and risk profile, she added.

Published on June 26, 2026