DSP Mutual Fund Introduces Business Cycle Fund for Dynamic Investment Opportunities

DSP Mutual Fund has launched DSP Business Cycle Fund, it is an open-ended equity scheme following business cycles based investing theme.

Currently, global economies are grappling with challenges like rising inflation, fluctuating interest rates, and geopolitical tensions. In India, sectors such as manufacturing, infrastructure, technology, and renewable energy are gaining prominence, fueled by policy reforms and increasing domestic demand. A business cycle fund positioned to capture these trends could be a strategic addition to portfolios.

[Read: These Thematic Mutual Funds Offered Over 50% Returns In 1 Year. Should You Invest in Them?]

By leveraging a business cycle-focused investment strategy, the fund aims to capitalize on sectoral shifts during different phases of the economy, such as expansion, peak, contraction, and recovery. Business cycle-focused mutual funds operate on the principle of aligning investments with the different phases of the economy's growth and contraction.

What will be the investment strategy for DSP Business Cycle Fund?

DSP Business Cycle Fund aims to generate capital appreciation by investing in equity and equity related securities with a focus on riding business cycles through dynamic allocation across various sectors / themes / stocks at different stages of business cycle.

A business cycle broadly covers phases of expansion and contraction. During the expansion phase, the economy generally experiences an uptrend in economic activity. On the other hand, during the contraction phase, the economic activity goes through a downtrend.

The fund manager will consider multiple macroeconomic and business cycle indicators to understand the prevailing conditions. Some of the indicators considered include GDP Growth, Inflation, Corporate Profitability Trend, Credit Growth, Interest Rate Cycle, Capacity Utilization, Retail Sales and Industrial Production.

The scheme aims to take higher exposure to sectors that are going through or expected to go through an uptrend and vice versa. Given the business cycle approach, the fund may not have investments across all sectors at a given time.

[Read: The Ultimate Guide to the Best SIP Plans for 2025]

How will the scheme allocate its assets?

Under normal circumstances, DSP Business Cycle Fund will hold an allocation of 80% to 100% in Equity and Equity related instruments based on business cycle, 0% to 20% in Equity and Equity related instruments other than business cycle, 0% to 20% in Debt and Money Market Instruments and 0% to 10% in Units issued by REITs & InvITs.

Should investments in DSP Business Cycle Fund be considered?

DSP Business Cycle Fund is an actively managed equity fund that aligns its portfolio based on prevailing and expected economic cycles. The fund seeks to capitalize on industries and sectors likely to perform well during specific phases of a business cycle, such as expansion, slowdown, or recovery.

This dynamic approach allows it to shift exposure to sectors expected to perform well during prevailing market conditions, offering the potential for higher returns compared to conventional diversified funds. The fund's performance largely depends on the fund manager's ability to predict economic cycles accurately.

Given the current volatility in Indian equity market, factors like rising interest rates, geopolitical concerns, and fluctuating inflation may influence business cycles. Sectors like manufacturing, infrastructure, and technology are poised for growth, which could align with the fund's focus. However, global headwinds could introduce volatility.

This fund is best suited for experienced investors with a high-risk tolerance and a long-term investment horizon of 5-7 years. Understanding macroeconomic trends is crucial, as the fund's strategy requires identifying which sectors are likely to thrive during specific phases of the business cycle.

For beginners or risk-averse investors, the volatility associated with cyclical investments might make this fund less appealing.

[Read: Power Your Portfolio: 5 Sector & Thematic Funds to Consider]