Sectoral Bets Or Strategic Allocations? Evaluating Indian Mutual Funds Through Efficiency Models

This study examines the performance of 16 sectoral mutual funds across four major industries—Infrastructure, Banking, Pharma, and FMCG—over a five-year horizon. Using metrics such as average returns, absolute returns, benchmark comparisons, risk profiles, and performance ratios (Sharpe, Treynor, Jensen’s Alpha, and Fama decomposition), the research identifies sector-specific strengths and weaknesses. Infrastructure and Pharma funds show strong absolute returns, with Pharma emerging as the most consistent long-term wealth creator. FMCG funds deliver stable but moderate returns, while Banking funds underperform across most horizons. An efficient portfolio, constructed through the Markowitz optimization model, highlights a dominance of FMCG and BFSI funds, generating a 9.5% return with controlled volatility. The findings underscore the relevance of sectoral diversification and the importance of risk-adjusted performance for long-term investment strategies.