New Delhi, Aug. 19 -- Every market investor faces a common dilemma: should one own banks or pharmaceuticals? Manufacturing or consumption? Value or growth? The answer changes as the economy and markets evolve, but getting the timing right is very difficult.

Business cycle funds promise to solve exactly this problem. They seek to identify where the economy is in the cycle and allocate capital to the sectors expected to benefit most from that phase. During an expansion, they may favour banks, industrials, capital goods and infrastructure.

As growth slows, they may shift towards defensive bets such as pharmaceuticals, FMCG or utilities. The objective is not merely to participate in equity markets, but to outperform them by rotating between...