List of the Best Business Cycle Funds in India (2025)
Business cycle funds are designed to capitalise on the natural economic cycles that occur in any economy. These funds invest in sectors that perform well during various phases of the business cycle, including expansion, peak, recession, and recovery. By shifting investments to the right sectors at the right time, Business cycle funds aim to maximise returns while minimising risks.
Best Business Cycle Funds in India
| Fund Name | AUM (Rs. in cr.) | Expense Ratio (%) | 3Y CAGR |
|---|---|---|---|
| ICICI Pru Business Cycle Fund | 13,479.13 | 0.74 | 24.87 |
| Tata Business Cycle Fund | 2,836.96 | 0.5 | 21.36 |
| Kotak Business Cycle Fund | 2,914.48 | 0.59 | 19.52 |
| Baroda BNP Paribas Business Cycle Fund | 578.42 | 0.91 | 18.34 |
| Aditya Birla SL Business Cycle Fund | 1,758.55 | 1.23 | 15.27 |
| HDFC Business Cycle Fund | 2,888.32 | 0.84 | 0.00 |
| Motilal Oswal Business Cycle Fund | 1,976.19 | 0.62 | 0.00 |
| Edelweiss Business Cycle Fund | 1,872.27 | 0.42 | 0.00 |
| Sundaram Business Cycle Fund | 1,783.74 | 0.43 | 0.00 |
| Bandhan Business Cycle Fund | 1,598.10 | 0.54 | 0.00 |
Note: The data on the list of the best business cycle funds is from 5th September 2025. It is derived from the Tickertape Mutual Funds Screener using the following filters:
- Plan: Growth
- 3Y CAGR: Sorted from Highest to Lowest
🚀 Pro Tip: You can use Tickertape’s Mutual Fund Screener to research and evaluate funds with over 50+ pre-loaded filters and parameters.
Overview of thWhat are Business Cycle Funds?
Business Cycle Funds are investment funds that aim to capitalise on the various phases of the economic cycle, which include expansion, peak, recession, and recovery. These funds focus on sectors that typically perform well during each phase of the economic cycle. For example, during an economic expansion, sectors such as technology and consumer goods may experience growth. In contrast, during a recession, defensive sectors like utilities and healthcare tend to be more resilient. By adjusting their investments according to the prevailing phase of the business cycle, these funds seek to maximise returns and mitigate risks.
Overview of the Top Business Cycle Funds
ICICI Pru Business Cycle Fund
ICICI Pru Business Cycle Fund follows a sectoral approach, investing in industries that are expected to perform well during various stages of the economic cycle. The fund actively adjusts its portfolio in response to the phases of the business cycle, aiming to generate optimal returns.
Tata Business Cycle Fund
Tata Business Cycle Fund strategically focuses on sectors that thrive at different stages of the business cycle. The fund’s dynamic portfolio aims to capitalise on growth opportunities, adjusting its investments according to economic trends.
Kotak Business Cycle Fund
Kotak Business Cycle Fund invests in sectors that benefit from the current phase of the business cycle. The fund uses active management to shift its exposure between various sectors, aiming to capture growth during expansion and provide stability during downturns.
Baroda BNP Paribas Business Cycle Fund
Baroda BNP Paribas Business Cycle Fund aims to leverage the business cycle by investing in sectors with strong growth potential during each phase. It adapts its strategy based on economic indicators, seeking to enhance returns by targeting high-performing industries.
Aditya Birla SL Business Cycle Fund
Aditya Birla SL Business Cycle Fund focuses on sectors that are expected to benefit during the different phases of the economic cycle. The fund’s portfolio is actively managed, with sectoral allocations adjusted as the economy transitions through its stages.
HDFC Business Cycle Fund
HDFC Business Cycle Fund adopts a sectoral investment strategy, targeting sectors that are likely to perform well during different business cycle phases. The fund aims to capture growth during expansion and provide protection during economic slowdowns.
Motilal Oswal Business Cycle Fund
The Motilal Oswal Business Cycle Fund employs a dynamic approach, investing in sectors that are expected to perform well during various phases of the business cycle. The portfolio is actively managed, with regular adjustments to sector allocations based on economic conditions.
Edelweiss Business Cycle Fund
Edelweiss Business Cycle Fund adopts a sector-focused approach, investing in industries poised for growth at various stages of the economic cycle. The fund adjusts its portfolio actively, based on economic signals, aiming to maximise returns.
Sundaram Business Cycle Fund
Sundaram Business Cycle Fund invests in sectors that are likely to benefit during specific phases of the business cycle. It employs a flexible approach to adjust its sector allocation as economic conditions change, thereby optimising returns.
Bandhan Business Cycle Fund
Bandhan Business Cycle Fund takes a thematic approach, investing in sectors that are expected to thrive during different economic phases. The fund’s strategy is to adjust sector allocations in response to economic trends, aiming to deliver strong long-term returns.
How to Invest in Business Cycle Funds?
You can easily invest in the business cycle funds by following these steps:
- To invest in mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
- The next step would be to research and identify the top business cycle funds that align with your investment thesis. You can easily select and learn more about the business cycle funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With 50+ pre-loaded filters, it helps you to create a comprehensive list by giving insights about the fund’s performance. Try it now!
- Once you have selected the best business cycle funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund in the search bar and hit enter. You can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!
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- smallcases are readymade model portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered investment experts (also known as smallcase managers)
- smallcase offers over 500+ stock portfolios, created by 200+ managers
Here are a few popular smallcases among new investors:
Disclosures for aforementioned smallcases
Features of Business Cycle Funds in India
- Sectoral Allocation: Business cycle mutual funds adjust their portfolio to target sectors that are expected to benefit from the current phase of the business cycle.
- Active Management: Fund managers actively manage business cycle mutual funds, making changes based on economic indicators and forecasts.
- Market Sensitivity: Business Cycle Funds are highly sensitive to market conditions and the business cycle. Their performance may fluctuate depending on the overall economic environment.
- Performance Linked to Business Cycle Phases: The performance of business cycle mutual funds is directly tied to the successful identification and capitalisation of the current business cycle phase, requiring expert analysis and foresight.
Benefits of Investing in Business Cycle Funds
- Potential for Enhanced Returns: Business cycle funds aim to capitalise on sectors that perform well during specific phases of the business cycle. This approach may result in higher returns compared to more traditional, passive investment strategies that do not adjust to economic cycles.
- Active Management Adaptability: As business cycle mutual funds are actively managed, they can quickly adapt to changing economic conditions, ensuring that investments are aligned with sectors expected to benefit in the current phase of the business cycle.
- Diversification Across Sectors: By investing in multiple sectors that react differently to various economic phases, business cycle mutual funds offer a level of diversification, which can reduce risk and potentially increase stability in a portfolio.
- Protection During Downturns: During recessions or economic slowdowns, business cycle funds tend to shift their focus towards more defensive sectors, such as utilities or healthcare, which are less impacted by market downturns, potentially helping to protect against losses.
- Exposure to Economic Growth: When the economy enters an expansion phase, business cycle funds can provide exposure to sectors like technology or consumer goods that typically perform well during growth periods, offering potential for significant gains.
Risks of Investing in Business Cycle Funds
- Timing Risk: Predicting the exact timing of the business cycle phases is challenging. If a fund manager misjudges the phase or moves too early or late, it can result in underperformance. Poor timing can affect returns, especially if sectors are not aligned with the cycle.
- Sector Concentration Risk: Business cycle funds typically focus on a few sectors that are expected to perform well during a specific phase of the business cycle. This concentration can expose the fund to higher risk if the industry selected underperforms or if the manager fails to adapt quickly to a changing economic environment.
- Economic Dependency: The performance of business cycle funds is closely tied to macroeconomic factors, including GDP growth, inflation rates, and interest rate changes. Any significant change in these indicators can directly impact the fund’s performance, making it highly dependent on broader economic conditions.
- Manager Risk: As the best business cycle mutual funds require active management, the expertise and decision-making of the fund manager are crucial. If the manager misjudges the business cycle or fails to respond to economic changes appropriately, it can negatively affect the fund’s performance.
- Liquidity Risk: Some business cycle funds may hold concentrated positions in specific sectors, which can be less liquid, particularly during market downturns. This can make it more difficult to exit positions without affecting the market price, particularly during times of economic uncertainty.
Taxation on Business Cycle Funds in India
Understanding the latest tax regulations on the business cycle funds is essential for making informed investment decisions. The Union Budget 2024 has introduced significant changes to the taxation of equity funds in India, simplifying the tax structure while altering rates and benefits. Here is a detailed breakdown of the new tax rules on equity funds which also apply to business cycle funds:
Equity Funds
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
- No Indexation Benefit: This change affects the overall tax liability, potentially increasing it for long-term investors.
Factors to Consider When Investing in Business Cycle Funds
- Economic Sensitivity: Business cycle funds are designed to perform well in response to the economy’s phases, so it’s crucial to evaluate how responsive the fund is to economic changes. Understanding how the fund adjusts its strategy in response to changes in GDP growth, inflation, and interest rates can provide insight into its future performance.
- Alignment with Personal Financial Goals: While business cycle funds aim to capitalise on economic trends, their suitability largely depends on your financial objectives. If you seek more stable, long-term growth, you might want to assess whether these funds align with your broader portfolio or investment timeline.
- Sector Rotation Strategy: The best business cycle mutual funds rotate investments across various sectors depending on economic conditions. It’s essential to assess how effectively the fund manages this rotation and whether it has a proven track record of adapting to market shifts.
- Fund’s Historical Performance Across Cycles: A fund’s performance during past economic cycles can give insights into how it might perform during future cycles. Reviewing its performance across expansions, recessions, and recoveries can help assess whether it’s a good fit for your portfolio.
To Wrap It Up
Business Cycle Funds are a unique way to capitalise on the economic cycles. By focusing on the sectors that perform well during specific phases, these funds offer a dynamic and responsive investment strategy. However, like all investments, they come with risks that require careful consideration and evaluation. By understanding the business cycle, monitoring key economic indicators, and selecting the appropriate fund, you can make informed decisions that align with your financial objectives.
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Frequently Asked Questions About Business Cycle Funds
Business cycle funds aim to take advantage of the different phases of the business cycle, expansion, peak, recession, and recovery. The fund manager adjusts the portfolio to focus on sectors that are expected to perform well during each phase, aligning investments with the current economic conditions.
These funds typically invest in sectors that are sensitive to economic cycles, such as technology, consumer goods, and financials during periods of economic expansion, and more defensive sectors like healthcare, utilities, or energy during recessions.
The suitability of business cycle funds depends on the investor’s approach and the duration of economic cycles. Since these funds are aligned with economic phases, their performance may vary based on the timing of these cycles.
Investment decisions in business cycle funds depend on understanding where the economy is in its cycle. Economic indicators, such as GDP growth, inflation, and interest rates, provide insight into the phase the economy is in, helping guide the fund’s performance.
Risks include market volatility, the difficulty in accurately predicting the phases of the business cycle, and sector concentration. These funds are exposed to economic fluctuations and may experience significant changes depending on the manager’s ability to adjust the portfolio effectively.
Returns from business cycle funds are dependent on the accuracy of the fund manager’s predictions of the economic cycle and the sectors they choose. While there is potential for higher returns by targeting high-growth sectors, this is not guaranteed and can vary depending on market conditions.
Business cycle funds differ from traditional equity funds by focusing on specific sectors that are expected to perform well during particular phases of the business cycle. This strategy of sector rotation aims to optimise returns by adjusting to economic shifts.
