Sectoral Funds Riskier

I trade in equities but recently sold my shares. With the political uncertainty, I do not want to take the risk of directly entering the stock market now. But I would like to invest the proceeds elsewhere. The amount is Rs 10 lakh and I am looking at a time frame of a year. A broker has proposed that I invest Rs 2 lakh in each of the following funds: Reliance Diversified Power Sector, Tata Infrastructure, JM Basic, DSPML T.I.G.E.R. and Reliance Banking. What is your opinion?
-Rana G S

Avoid these funds. With a time frame of just 12 months, none of the above recommended funds are suitable for investment. Also, all of the above are sectoral equity mutual funds which are far riskier than diversified equity funds. JM Basic is an exception but it is not a pure diversified offering. Sectors like banking, pharma and technology will not find a place here. Investing in such funds with a one year period in mind can prove to be very risky. If you wish to park your money for a period of one year, it is best to consider an arbitrage fund. They are far less risky. As they fall in the same category as equity oriented mutual funds, the tax treatment is similar and the gains would be tax free after a year.

(by value research)