During the market fall of 2008, most funds increased exposure to ‘defensive sectors such as software, pharmaceuticals and FMCG. Banking has, of course, always figured prominently for most of the funds.

In the subsequent rally from March 2009, these sectors were the top performing ones and continue to be so even in the sideways markets over the last six months.

Despite running up on valuations, probably not being defensive has helped the run these stocks have had.

But it is these very sectors that have demonstrated better earnings visibility, which has meant continued interest in them.

Also, the risk factors associated with other sectors due to a high interest rate scenario and inflation has meant limited choice for investors.

This has meant that a Reliance Banking, Reliance Pharma, SBI Magnum SFU Infotech, Franklin FMCG, Franklin Pharma, UTI Bank and the like have outperformed heavily and in the case of fund houses such as Reliance and UTI propped up the fund house's returns substantially.

Even outside theme funds, the best performing funds and fund houses, that have all been low on cash, have given priority to the above mentioned sectors in their portfolio and, in some cases, added automobiles to prop returns.

For example, HDFC's equity schemes have always had banks, consumer non-durables, pharma and software as the top sectors.

Looking beyond the top few

It might pay to look at the next set for asset management companies outside the top 15 and funds that deliver reasonable returns. But they have been around for a shorter period and will have to be watched closely.

Though the bulk of the top performing funds across market cycles come from top fund-houses, those from the smaller pack such as Quantum Long Term Equity and Principal Large Cap Fund and Canara Robeco Equity Diversified too have had a reasonable track record in delivering steady returns.

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