Avoid over-allocation and chasing recent performance

In calendar year (CY) 2025, sectoral funds tracking the Nifty PSU Bank (26 per cent), Nifty Auto (20 per cent) and Nifty Metal (24 per cent) emerged as top performers.

- SARBJEET K SEN

While banking and financial stocks did well overall, PSU banks benefited in particular from lower interest rates, infusion of liquidity, and relatively attractive valuations.

Nifty Auto gained on rising vehicle demand and improved sentiment, while Nifty Metal was supported by higher commodity prices. Nifty Defence also performed well, delivering 19 per cent returns amid rising defence expenditure and higher export potential.

A risky bet

Sectoral and thematic investments require caution, as leadership can shift rapidly. “The concentrated nature of these funds makes them inherently more volatile,” says Vishal Dhawan, founder and chief executive officer, Plan Ahead Wealth Advisors.