Can a mix of sector indices beat Nifty 500?

Summary: Think building your own sectoral portfolio is smarter? Think again. We ran a 20-year SIP experiment to see if combining 10 sector indices beats a simple diversified index. The result? Modest upside, more complexity and a lot more effort for nearly the same outcome. Sometimes, less really is more. We’ve always cautioned against putting all your money in one sector. Because when it’s hot, it sizzles, but when the tide turns, your portfolio takes the full brunt of the fall. That’s why we usually recommend broad, well-diversified funds that spread your money across sectors automatically. But here’s a tempting thought: what if you mixed and matched different sector funds to whip up your own “diversified” portfolio? On the surface, it looks smart and balanced. But does this DIY (do it yourself) recipe really beat the simplicity and resilience of a single broad-based portfolio? To find out, we ran a 20-year experiment. Starting October 2005, we imagined an investor putting in Rs 10,000 every month, with an annual 10 per cent step-up. But instead of choosing one index, they split the money evenly across the top 10 sectors of the Nifty 500 using sectoral indices. (Before we dive in, a quick note: we primarily used Nifty sectoral indices, but where they didn’t exist or lacked enough history, we drafted BSE indices as reliable stand-ins.) We then ran the same experiment with just one simple index, the Nifty 500 TRI. Since the Nifty 500 can have a higher concentration in certain sectors, we also consi

This article was originally published on September 20, 2025.