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Ever since tensions erupted in the Middle East, the Indian stock market has been characterized by volatility. Consequently, investors are seeing negligible returns from the broader indices. However, Indian equity markets have repeatedly demonstrated that sector leadership rarely remains static for extended periods.

What performed well six months ago may quickly lose momentum, while sectors that were previously overlooked can suddenly emerge as market leaders. For most investors, identifying these shifts early—and acting upon them with discipline and without emotional bias—remains one of the most formidable challenges in investing.

**How ​​to Generate Superior Returns**

This is precisely where sector rotation strategies become relevant. Rather than asking individual investors to place concentrated bets on specific sectors, certain funds are institutionalizing this process through data-driven allocation models. One such example is the ICICI Prudential Multi-Sector Passive FoF, which adopts a model-based approach to allocate capital across various sector-specific and multi-sector ETFs, guided by economic cycles, valuations, and risk-reward opportunities.

**What Returns Can Be Expected?**

The fund's recent portfolio strategy serves as a testament to this disciplined approach. Between December 2025 and April 2026, the allocation to the Metals sector was reduced from approximately 10% to 6.59%—a move prompted by the strong rally witnessed within that sector. Many investors might have been tempted to chase this rally; however, the fund's strategy dictated otherwise. During this same period, the allocation to Private Sector Banks was increased from 19% to 26.68%. Furthermore, allocations to the Power sector and the Pharmaceutical sector were raised from zero to 8.39% and 9.56%, respectively, as the underlying model identified superior risk-reward ratios within these specific domains. As of April 2026, the largest portion of the portfolio—26.68%—was allocated to Private Bank ETFs, followed by FMCG ETFs (10.55%), Pharma ETFs (9.56%), Nifty Oil & Gas ETFs (9.40%), IT ETFs (8.58%), and Power ETFs (8.39%). Other investments included Auto, Metal, Banking, and Realty ETFs, as well as short-term debt instruments. This fund is managed by Sankaran Naren and Dharmesh Kakkad, who have been associated with this scheme since 2018.

**13.35% CAGR Returns**

Beyond its strategic approach, this fund also offers practical implementation benefits. Investors are spared the burden of buying and selling multiple ETFs individually—a process that typically entails additional Demat and brokerage costs. The fund's expense ratio stands at approximately 0.60% (inclusive of the underlying ETF expenses), and an exit load of 1% is applicable if units are redeemed within 15 days. In terms of performance, as of April 30, 2026, the scheme has delivered returns at a CAGR of 13.35% since its inception. In comparison, the Nifty 500 TRI has delivered returns at a CAGR of 12.91%. For investors who believe that returns in the Indian market will be driven by leadership across various sectors—rather than just a select few stocks—the ICICI Prudential Multi-Sector Passive FoF offers a superior and disciplined avenue for participating in the market. Crucially, this approach eliminates the need for investors to constantly predict which sector will be the next to outperform.

**How ​​Stocks Are Selected**

The fundamental principle is straightforward: participate in sectoral opportunities without relying on emotional impulses to drive investment or exit decisions. Rather than selecting individual stocks, this fund invests passively across various sector ETFs and dynamically adjusts its allocations based on macroeconomic signals, earnings trends, and market indicators. Historically, sector cycles in India have rotated through phases of recovery, expansion, and recession. During periods of recovery, cyclical sectors—such as Metals, Power, or Banking—often take the lead, whereas defensive sectors—such as FMCG or Pharma—become crucial during times of uncertainty. It is challenging for retail investors to consistently navigate these shifts, particularly because their investment behavior is often driven by recent performance rather than by future fundamentals.

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