Sector Funds are investment funds that mainly invest in businesses in one particular sector or industry of the economy. These investments are usually in the form of exchange-traded funds (ETFs) or mutual funds. The returns from such funds, albeit risky, can be rewarding.  Here are five sectors that show a lot of promise for investors this year:

- Banking:

A number of sectoral mutual funds have increased their allocation in this sector of the economy, resulting in a higher proportion of banking and financial stocks in the market. The driving reason behind this is the ability of these stocks to generate excellent returns on a consistent basis, making banking sector funds a smart long-term investment. However, if the investor’s risk tolerance is low, or they are not up-to-date on the market trends, banking sectoral mutual funds may not be the wisest option.

- Infrastructure:

Infrastructure can be considered one of the primary drivers of India’s economy. The Indian government is focusing heavily on development in this sector and as a result, making considerable investments in highway/road maintenance, urban transport and renewable energy. The steel industry in particular has quickly become a solid option for investors seeking sector fund opportunities. 

- Pharmaceuticals:

With the events of last year, healthcare and pharma have become a key area of focus all over the world. Additionally, with vaccination development and drives in full swing, this year will see suppliers becoming major contributors in this sector. Investments in pharma sectoral funds are expected to deliver good returns at least for the next few quarters. As mid cap pharma is undergoing a transitory period currently, investing in large cap pharma is recommended.

- IT/ technology:

The IT and technology sector has seen a huge boom in the past year as remote learning, remote business/financial transactions and working from home quickly became the new standard during the pandemic. Leading to a significant increase in demand for high speed internet connections, smart phones, and other devices and services in this segment has led to an acceleration in development and innovation too. This acceleration is reflected in the performance of the IT stock market as well, making sector funds in this segment an advantageous investment.

- Chemicals:

Since global investors moving out of China have India on their radar as a potential market, chemicals may be a promising sector this year. With India’s global market share in this segment going up, our economy’s future in this business holds a lot of potential and several big companies are investing in expansion and distribution. For Indian investors in 2021, this is one of the most lucrative options when it comes to sector funds.

Conclusion

Although the economy has suffered due to the pandemic, markets are on the path to recovery. For any investor with clear goals and an essential understanding of sectors and sectoral funds, 2021 brings new opportunities. In addition to research regarding the best sector funds and schemes to invest in, it would help to consult a financial expert and get your queries clarified. Additionally, if you have doubts surrounding pure equity fund investments, note that even when the market is unreliable, purchasing these when they are available at lower net asset value can give you a good chance of high returns when the market has improved.

 

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