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According to Kotak AMC, a business cycle fund follows both top-down and bottom-up approaches.
Popular business cycle funds in India are Kotak Business Cycle Fund, Motilal Oswal Business Cycle Fund, ICICI Prudential Business Cycle Fund, HSBC Business Cycles Fund, Quant Business Cycle Fund, Tata Business Cycle Fund, and Edelweiss Business Cycle Fund.
Investors who seek to capitalise on economic shifts find Business Cycle Funds a compelling choice. These funds strategically ride waves of sector rotations and offer a dynamic approach to building wealth with no need for constant portfolio adjustments. These funds use a disciplined and agile process. They proactively adjust their portfolios, unlike static thematic investments.
The investment objective of the scheme is to generate capital appreciation by investing predominantly in equity and equity-related securities with a focus on riding business cycles through dynamic allocation between various sectors and stocks at different stages of business cycles in the economy.
How Do Business Cycle Mutual Funds Work?
The fund follows both top-down and bottom-up approaches. “The Fund would follow a top-down approach of portfolio construction to identify stages of business cycle, sector opportunities and subsequently use a bottom-up approach to identify strong companies within those sectors,” Kotak AMC said on its website about the Kotak Business Cycle Fund, which was launched in September 2022.
The fund concentrates on 5-6 sectors at an inflection point, which form 80-90% of the portfolio. A data-driven, team-oriented process then finds companies ready for earnings acceleration, ROE expansion, and stronger cash flows over the next 12-36 months. This strategy relies on tangible triggers like structural reforms, policy tailwinds, or capex cycles. A review mechanism ensures agility, so the fund can exit fading opportunities and reallocate into new high-conviction ideas quickly.
The Kotak Business Cycle Fund, for instance, raised its healthcare exposure from 5% to 14% between June 2023 and March 2025 to capitalise on strong domestic demand. This move alone contributed an about 2-3% to returns. At the same time, it cut its IT allocation from 8% to 3% amid weak global demand and moved that capital to better opportunities, generating an alpha of 5.7% over the past year.
The fund adjusts its holdings across large-, mid-, and small-cap stocks. This captures growth across the market and defers capital gains taxes, a major perk for tax-conscious investors.
As on November 19, 2025, the Kotak Business Cycle Fund delivered a robust CAGR (compound annual growth rate) of 19.46% in the past 3 years and over 7% in the last one year, outperforming the Nifty 500 TRI benchmark, which delivered 16.5% and 5.6%, respectively, over the same periods.
Currently, the fund is overweight in Consumer, Infrastructure, Healthcare, Capital Goods and Automobile Components which are supported by strong demand and sector specific growth drivers.
Other popular business cycle funds in India are Motilal Oswal Business Cycle Fund, ICICI Prudential Business Cycle Fund, HSBC Business Cycles Fund, Quant Business Cycle Fund, Tata Business Cycle Fund, and Edelweiss Business Cycle Fund.
Disclaimer:Disclaimer: The views and investment tips shared in this article are for general information purposes only. Readers are advised to consult a certified financial advisor before making any investment decisions.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
November 19, 2025, 17:43 IST
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