Mutual Funds have time and again responded to the changing market dynamics. Be it an innovative product or a different investment strategy mutual funds have tried to capture every pocket of the market and enthuse greater investor participation. That could be gauged from the response different ideas have garnered in the recent past.

Till some years ago when equity diversified funds were the only choice available, sectoral funds kicked off a new genre of equity funds. Today there are Technology Funds allocating primarily to IT stocks, Auto Funds focusing on auto stocks and many more. These funds bring with them a potential to perform in case of good market conditions for the sectors in focus. But by the virtue of being too focused bear a risk-return profile alien to most investors on account of their volatile nature. Once the rally in that sector fizzles out such funds become difficult to manage and thus investing in sector specific funds is only advisable for those who like all their eggs in one basket. Consequently Sector Funds are passé and ball game shifted to new category of funds, Thematic Funds, aimed to take the advantage of exuberant mood prevalent in the economy driven by consumption boom and demographic advantages, increased thrust on infrastructure by government, increased corporate capital expenditure etc.
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These funds differ from pure sector fund, spread across the gamut of the investment universe and offer the investor the flexibility to change themes with changing economic conditions. Seen against pure sectoral play a semi diversified approach makes investor less susceptible to risk. What is more interesting to note that these funds are trying to cotton on to far broader themes-infrastructure and services being two of them. For instance recently launched HSBC India Advantage Fund intended to invest in themes that play an important role in India’s progress and economic development with focus on diverse areas that could include consumption, reforms, infrastructure, outsourcing and global competitiveness. Thus theme is not just one or two sectors, rather a broader opportunity encompassing several sectors. The outsourcing opportunity is not restricted to technology; it includes manufacturing and pharma among other sectors. The capital goods and infrastructure theme includes several sectors.

A look at the some of their portfolios reveals that these funds have invested in stocks representing a variety of industries. Prudential ICICI Infrastructure Fund focusing on infrastructure & other related sectors has invested across various sectors and it is not that their allocation has in any way transcended the originally stated objectives. However their definition of infrastructure sector is quite broad based and imparts it a diversified look. Here the fund manager is picking stocks from all areas and selection well includes Auto, Bank and Telecom etc.

As rightly said now is the most difficult time to invest and generating superior returns requires fund manager to identify the attractive opportunities that could go well with the market moods and emerge as the momentum picks that has the potential to outperform. Given that at any point of time, there are certain sectors in the economy that perform better than others an early identification of these sectors for investments could reap rewards for the investors.