In September 2025, inflows into sectoral and thematic mutual funds in India plunged by ~69%, reflecting investor caution toward concentrated bets. The Economic Times
Introduction
When building a wealth management portfolio, picking assets is only half the job.
Choosing which sectors to invest in and how much is equally important.
That’s what sectoral allocation means.
It’s about distributing your equity exposure across industries like banking, IT, healthcare, consumer goods, and more.
Good sectoral allocation helps manage risk, seize trends, and balance returns.
Let’s dive deeper into why this matters, how to do it well, and examples from India’s markets.
What Is Sectoral Allocation?
Sectoral allocation is the process of dividing your equity or thematic investments across different sectors.
For instance:
- 25% in Financials
- 20% in Technology / IT
- 15% in Consumer Goods
- 10% in Healthcare
- 10% in Industrials
- Remaining in Energy, Utilities, etc.
Each sector behaves differently. When one sector lags, another might lead.
Why Sectoral Allocation Matters
- Risk Management
If you over-concentrate in one sector, bad news in that area can hurt your portfolio badly. - Capture Growth Cycles
Sectors rotate. Tech may lead for a while, then industrials may take over. Smart timing helps. - Reduce Volatility
Balanced sector holdings smooth returns. You avoid wild swings if one sector crashes. - Exploit Sector Trends
New themes like green energy, AI, fintech, and healthcare innovation, being in the right sectors, boost returns.
How to Decide Sectoral Allocation
Here are the key steps:
1. Start with a macro view
Look at economic trends:
- Is India pushing “Make in India” and infrastructure?
- Are tech & digital services expanding?
- Which sectors get government support, subsidies, and reforms?
Goldman Sachs sees strong structural growth in India thanks to reforms, infrastructure, and demographics.
2. Combine top-down and bottom-up
- Top-down: Identify the sectors you prefer for long-term investment.
- Bottom-up: Pick good companies in those sectors based on fundamentals.
3. Limit exposure per sector
Don’t put too much in one area. Many advisers recommend capping any sector to 5–10% of equity allocation.
4. Use sector rotation strategies
Move weights across sectors over time. When one starts lagging, reduce it and shift to another.
Academic models combine factor analysis and fundamentals to guide rotation.
5. Rebalance periodically
As sectors outperform or underperform, your weights drift.
Set a schedule (quarterly, semi-annual) to bring back to target.
Sectoral Allocation in India: Key Sectors & Trends
Here’s what’s relevant now in India:
- Financials / Banking / NBFCs: Core of India’s growth, credit expansion.
- Technology / IT / Digital India is a global IT services hub.
- Consumer Goods / FMCG / Retail Rising incomes drive demand.
- Healthcare / Pharma / Life Sciences Ageing population, health infrastructure push.
- Infrastructure / Real Estate / Industrials Government is investing heavily in roads, power, and logistics.
- Energy / Renewables The transition to green energy makes this sector particularly interesting.
In multi-asset funds in India, recent data shows increased allocation to sectors like real estate, communication, industrial, basic materials, and tech.
Also, in India’s wealth management space, many affluent clients now want exposure to “new India” sectors digital, sustainability, health, etc.
Risks & Pitfalls
- Over-concentration: If a sector declines heavily, your portfolio suffers.
- Timing errors: Jumping in late at the sector peak hurts.
- Changing fundamentals: What’s hot today may be obsolete tomorrow.
- Neglecting diversification: Don’t ignore non-sector risks, macro, policy, and currency.
Example Strategy
Here is a sample sectoral allocation for a moderate-risk equity portfolio:
| Sector | Allocation |
| Financials | 20–25% |
| Technology / IT | 15–20% |
| Consumer Goods | 10–15% |
| Healthcare | 8–10% |
| Industrials | 8–12% |
| Energy & Renewables | 5–8% |
| Utilities / Others | 5–10% |
You adjust these based on your risk profile, goals, and market outlook.
Why Fintech & Data Matter in Sectoral Allocation
You don’t have to guess. Use AI, analytics, and data tools to guide allocations:
- Trend detection
- Backtesting sector rotation
- Risk modeling
- Simulations
At Equentis Investech, we combine domain knowledge + data models to suggest smart sector weights for clients.
Conclusion
Understanding and managing sectoral allocation is a powerful tool in wealth management.
It balances risk, captures opportunity, and makes your portfolio more resilient.
By combining macro themes, bottom-up research, periodic rebalancing, and fintech tools, you can optimise sector exposure.
At Equentis Investech, we help design sector-smart portfolios so clients benefit from growth while managing risks.
