Summary of this article
Fund outperformed benchmark over five years since launch
Strategy rotates sectors based on economic cycle phases
Suitable only for high-risk investors comfortable with volatility
The ICICI Prudential Business Cycle Fund, the largest fund in the thematic-business cycle space, has completed five years since its launch. The scheme has delivered returns that have outpaced the broader market across lump sum and SIP investments, as shown by the data released by the fund house. Given the stellar performance, should investors invest in it? Whom is the fund suitable for, and who should stay away from it.
The fund was launched on January 18, 2021. It is an open-ended equity scheme following a business cycle-based investment strategy. The fund aims to dynamically allocate across sectors depending on the stage of the economic cycle. Over the five-year period, as on January 31, a lump sum investment of Rs 1 lakh made in the fund at inception would have grown to around Rs 2.51 lakh, translating into a compound annual growth rate (CAGR) of 20.06 per cent. In comparison, the benchmark Nifty 500 TRI delivered a CAGR of 15.47 per cent over the same period.
SIP investors also saw relatively stronger outcomes. A monthly SIP of Rs 10,000 since inception, amounting to a total investment of Rs 6.10 lakh, would have grown to approximately Rs 9.74 lakh as of January-end.
According to the fund house, the fund’s strategy is built around identifying macroeconomic trends and positioning portfolios to benefit from different phases of the business cycle, including recovery, expansion and slowdown. The investment process follows a top-down approach, tracking indicators such as growth trends, inflation, interest rates, fiscal dynamics and global economic conditions. As per the fund house, sector allocation decisions are made based on this assessment, followed by stock selection within chosen segments.
“Equity market leadership tends to shift as economic cycles evolve, making a cycle-aware approach critical for long-term investing,” says S Naren, executive director and chief investment officer at ICICI Prudential AMC. According to him, the focus remains on identifying inflexion points where fundamentals and sentiment diverge, and aligning sector exposure over a three-to-four-year horizon.
Looking at the current portfolio of the fund, as of January 31, 2026, the portfolio was tilted largely towards domestic-facing sectors, with nearly 80 per cent of assets aligned to areas expected to benefit from improving economic activity. Financials form the core allocation, supported by exposure to automobiles, construction and select industrial segments. The fund also maintains tactical cash positions to retain flexibility as macro conditions change.
According to the fund house, the scheme is suitable for investors seeking long-term capital appreciation and who are comfortable with equity market volatility, while looking to benefit from active sector rotation across business cycles.
According to Prashant Maurya, partner, Citrine Financial Advisors, a Delhi-based mutual fund distributor, this fund is a thematic fund and is suitable only for investors who understand how this fund functions. “This fund focuses on sectors or industries where the fund manager is expecting good growth.” He explains that if the economy is doing well, then these funds will deliver good returns, but they also come with high volatility. So, as per Maurya, this fund suits investors having a high risk profile and for those who can face the volatility with discipline. The fund is not meant for defensive or moderate investors,” he adds.
