Edelweiss Mutual Fund’s Business Cycles Fund (EBCF) has experienced a significant decline of 19% since its launch in July 2024, raising concerns among investors. CEO Radhika Gupta addressed these issues, explaining the fund’s strategy, recent market challenges, and potential recovery prospects.
Performance Overview
EBCF, launched in July 2024, has faced a challenging market environment, resulting in a 19% decline as of January 28, 2025. In contrast, the Nifty 500 index has only seen a 10.21% decrease during the same period. This disparity has understandably caused anxiety among investors, prompting CEO Radhika Gupta to clarify the fund’s situation.
Market Challenges
Gupta pointed out that EBCF employs a factor-based investment strategy that is particularly sensitive to business cycles, combining momentum with other market factors. However, the recent high volatility and frequent sector rotations have adversely affected the fund’s performance. Momentum, a crucial component of EBCF’s strategy, has struggled in this unstable environment, contributing to the overall decline.
Comparative Performance
While EBCF has underperformed the Nifty 500, Gupta highlighted that it has outperformed other momentum-based indices, such as the Nifty 200 Momentum 30 and the Nifty 500 Momentum 50, which have fallen by 20.37% and 24.07%, respectively. This indicates that, despite the challenges, EBCF has managed to navigate the volatility slightly better than its peers in the momentum space.
Recovery Outlook
Gupta remains optimistic about EBCF’s potential for recovery. She referenced historical data showing that funds experiencing a similar level of underperformance (around 9% relative to the Nifty 500) have historically bounced back with an average return of 15% over the following year. She suggested that investors could expect a recovery within the next 4 to 6 quarters, contingent upon market stabilization.
Strategic Adjustments
In anticipation of a market turnaround, Gupta revealed that EBCF has adjusted its portfolio by increasing its exposure to defensive sectors such as pharmaceuticals and consumer durables, now being 20% overweight in these areas compared to the NSE 500 Index. Conversely, the fund has reduced its investments in cyclical sectors like capital goods and construction, which are more vulnerable to economic fluctuations.
Final Takeaways
EBCF’s recent performance highlights the challenges faced by funds that rely on momentum strategies in volatile markets. While the fund has underperformed relative to broader indices, it has shown resilience compared to similar funds. Gupta’s insights into the fund’s strategy and adjustments provide a hopeful outlook for recovery in the coming months. Investors are encouraged to remain patient as the fund realigns itself for better performance in a stabilizing market.
