5 Mutual Funds Invested in Textile Stocks

It's a double bonanza for India's textile sector.

First, the EU-India Free Trade Agreement will reduce tariffs on textiles from up to 12% to zero.

Given the gap of EU imports US$ 263.5 billion (bn) and India's current textile exports (US$ 7.2 bn), the positive impact could be very high.

The prospect further improved when the US reduced duties on Indian textiles to 18%, down from a high of 50% in 2025.

Undoubtedly, the textile sector was the hardest hit, given that the US was India's largest market for textile and apparel exports, accounting for almost 28% of textile sales.

Ready-Made Garments (RMG) and Home Textiles segments are the powerhouse of India's exports, collectively accounting for nearly 59% of the total textile export basket. The US alone buys 48% of India's home textiles and 33% of its RMG exports.

In terms of market share, India is the fourth-largest supplier of textiles and apparel to the US, accounting for about 8-9.4% of US imports.

However, the reduction of the US reciprocal tariff to 18% has restored India's competitiveness against countries such as Bangladesh and Vietnam (effective tariff rates of around 20%), Pakistan and Indonesia (19%), and China (30-35%). The sector can now recoup lost volumes.

India aims to increase its global textile and clothing exports to US$ 100 bn by 2030 (from US$ 37 bn in FY25), with the US and EU markets playing a key role in achieving this target.

Meanwhile, the textile sector was the major focus area in the Union Budget 2026, with Rs 52.8 bn allocated to the Ministry of Textiles. The government announced an integrated program with 5 subparts.

This includes the National Fibre Scheme, the Textile Expansion and Employment Scheme, the National Handloom and Handicraft Programme, the Tex-Eco initiative, and Samarth 2.0.

The budget also introduced measures to promote export competitiveness and correct duty inversions. For exporters of textile garments (including leather), the export period for the final product manufactured from duty-free imported inputs is extended from 6 months to 1 year.

The duty-free import limit for specified inputs used in processing (grouped with marine and leather products) is increased from 1-3% of the FOB value of the previous year's export turnover.

The following analysis examines five mutual funds with portfolio exposure to textile stocks.

#1 Kotak Flexicap Fund

The Kotak Flexicap Fund, launched in January 2013, is an open-ended dynamic equity scheme investing across large-cap, mid-cap, and small-cap stocks.

The fund's flexible strategy allows dynamic allocation across market segments, helping capture opportunities in varying market conditions while maintaining diversification. The scheme concentrates investments in select economic sectors, diversifying at the stock level.

As of 31 January 2026, the fund's Asset Under Management (AUM) was Rs 564.78 bn. The scheme's expense ratio (Direct Plan) is 0.6% per annum, which is moderate.

The scheme's equity allocation is 97.46%, followed by debt (0.14%) and cash equivalents (2.4%).

Large-cap stocks accounted for 68.83% of the portfolio, followed by mid-cap (22.98%), small-cap (6.15%), and debt and money market (2.04%).

The portfolio is diversified, with Banking accounting for 23.88%, followed by IT-Software (7.13%), Aerospace and Defence (6.36%), Cement and Cement Products (6.24%), and Petroleum (4.57%).

The fund holds 59 stocks, with the top 10 stocks accounting for 42.57%.

HDFC Bank has the highest weight of 6.5%, followed by Bharat Electronics (6.36%), ICICI Bank (5.28%), State Bank of India (4.54%), and Axis Bank (3.88%).

The fund holds 3.4% of SRF, the largest manufacturer of technical textiles in India.

The scheme's price to earnings (PE) multiple of 25.71 is in line with the benchmark Nifty 500 Total Return Index (TRI) (23.9).

The portfolio turnover ratio is very low at 0.09, indicating a buy-and-hold strategy.

The fund has delivered a CAGR of 14.88% over the last 10 years, outperforming the benchmark Nifty 500 TRI (13.99%).

With a standard deviation of 11.92, the scheme's volatility is lower than the benchmark (12.41). A lower value indicates that the fund's returns fluctuate less over time.

The scheme outperforms the benchmark in mitigating drawdowns, with a Sortino ratio of 0.59, which is higher than the benchmark (0.48). A higher ratio means the fund is more efficient at generating profits while avoiding significant losses during market dips.

That is why, with a Sharpe ratio of 0.28 against the benchmark's 0.24, the fund also outperforms on a risk-adjusted basis. A higher value indicates the fund delivers better risk-adjusted performance across all market conditions.

#2 Mahindra Manulife Focused Fund

Mahindra Manulife Focused Fund, launched in November 2020, is an open-ended focused/multi-cap equity scheme.

The scheme invests in a concentrated portfolio of 30 stocks across a range of market capitalizations.

The fund manager has the flexibility to invest in companies of different sizes and across different sectors, depending on the opportunity.

As of 31 January 2026, the fund's AUM was Rs 22.28 bn. The scheme's expense ratio (Direct Plan) is 0.42%, which is moderate.

The scheme's equity allocation is 98.28%, followed by cash equivalents (1.72%).

Large-cap stocks accounted for 86.88% of the portfolio, followed by mid (9.46%), and small-cap (3.65%).

The financial sector accounted for 31.40% of the portfolio, followed by energy & utilities (14.66%), technology (14%), materials (12.01%), and industrials (9%).

The top 10 stocks account for 42.41% of the portfolio.

HDFC Bank has the highest weight of 6.56%, followed by Reliance Industries (6.56%), SBI (5.97%), ICICI Bank (5.73%), and Infosys (5.57%).

The fund holds 4.11% of Grasim Industries, India's largest exporter of Viscose Filament Yarn and Viscose Rayon Fiber.

The scheme's PE multiple of 18.93 is lower than the Nifty 500 TRI (23.9). The portfolio turnover ratio is moderate at 0.39, indicating a little churn.

The fund has delivered a CAGR of 22.8% over the last 5 years, outperforming the benchmark Nifty 500 TRI (20.93%).

With a standard deviation of 11.91, the scheme's volatility is lower than the benchmark (12.41). With a Sortino ratio of 0.73 against the benchmark's 0.48, the scheme also outperforms the benchmark in mitigating drawdowns.

The Sharpe ratio is 0.35 compared to the benchmark's 0.24. This indicates the fund outperforms on a risk-adjusted basis.

#3 HSBC India Export Opportunities Fund

HSBC India Export Opportunities Fund, launched in September 2024, aims to capitalise on export growth.

The thematic scheme allocates 80-100% of its assets to equities of companies that derive over 20% of their revenue from exports outside India.

It also retains the flexibility to allocate up to 20% to other equities. This clear export-linked allocation framework differentiates the fund from most thematic offerings in the industry. The fund aims to benefit from India's export growth, which is expected to grow at a 15% CAGR.

The fund manager filters companies based on a proprietary 4C evaluation: Company MOAT, Corporate Governance, Cash Flows, and comparative valuations.

As of 31 December 2026, the fund's AUM stood at Rs 14.14 bn. The scheme's expense ratio (Direct Plan) is 2.09%, which is high.

The scheme's equity allocation is 98.68%, followed by cash equivalents (1.32%).

Large-cap stocks accounted for 71.49% of the portfolio, followed by mid (7.57%), and small (20.94%).

Materials accounted for 21.49% of the portfolio, followed by Consumer Discretionary (20.88%), Energy & Utilities (16.62%), Industrials (13.74%), and Technology (10.79%).

The top 10 stocks account for 54.35% of the portfolio.

Reliance Industries has the highest weight of 15.3%, followed by Mahindra & Mahindra (7.6%), Larsen & Toubro (7.36%), Bajaj Finserv (4.63%), and Tech Mahindra (3.73%).

The fund holds 1.29% and 3.06% stake in Arvind and Grasim Industries.

The scheme, with a PE multiple of 29.25, is trading at a premium to Nifty 500 TRI (23.9). Over the past year, it has generated an absolute return of 1.86%, lagging the benchmark's (4.11%).

The fund with a standard deviation of 14.77, is more volatile than the benchmark (12.41). The fund's Sortino ratio is negative 0.06, significantly below the benchmark's 0.48, indicating weaker downside, on risk-adjusted performance.

The Sharpe ratio is also negative 0.04 compared to the benchmark (0.24). This shows that the fund also underperformed on a risk-adjusted basis.

However, the fund has a limited operating history. This limits meaningful long-term performance assessment.

#4 Aditya Birla SL Conglomerate Fund

Aditya Birla SL Conglomerate Fund, launched in December 2024, aims to capture the conglomerate theme.

Conglomerates are promoter-led groups domiciled in India that comprise at least two listed companies across different sectors. Its wide investment universe spans 169 companies across 22 sectors, with the aim of identifying opportunities to deliver long-term value to investors.

The fund follows a bottom-up approach focused on growth-oriented investments. It invests in at least four groups, with a maximum of 25% exposure to any single group.

The thematic scheme allocates 80-100% of its assets to equities within the conglomerate theme, with the balance 20% in debt and money market instruments and 10% in units of InvITs.

The fund offers flexibility, with a higher tilt toward mid and small-cap companies compared to the benchmark.

As of 31 December 2025, the fund's AUM stood at Rs 17.76 bn. The scheme's expense ratio (Direct Plan) is 0.86%, which is moderate, given that thematic funds often have higher expense ratios.

The scheme's equity allocation is 99.36%, followed by cash equivalents (0.64%). Large-cap stocks accounted for 42.55% of the portfolio, followed by midcaps (15.61%) and smallcaps (41.84%).

Consumer discretionary accounted for 21.21% of the portfolio, followed by industrials (18.64%), technology (18.53%), materials (12.87%), and healthcare (12%).

The top 10 stocks account for 38.42% of the portfolio. Reliance Industries has the highest weight (4.46%), followed by L&T (4.42%), Bharti Airtel (4.09%), Avalon Tech (4.08%), and eClerx Services (3.92%).

The fund holds 1.51% and 3.45% in Indo Count and Pearl Global Industries. Export accounted for over 50% of the revenues of these companies.

The scheme's PE multiple of 31.4 is at a premium to the Nifty 500 TRI (23.9). The portfolio turnover ratio is moderate at 0.16, indicating a little churn.

Over the past year, the fund has outperformed the benchmark (4.11%) with an absolute return of 7.59%.

The fund, with a standard deviation of 13, is more volatile than the benchmark (12.41). With a Sortino ratio of 0.17, well below the benchmark's 0.48, the fund trails on downside risk-adjusted performance.

The Sharpe ratio (0.08) is also below the benchmark (0.24), indicating underperformance on a risk-adjusted basis.

The fund has a limited operating history, which limits a meaningful long-term performance assessment.

#5 ICICI Pru Conglomerate Fund

ICICI Pru Conglomerate Fund, launched in October 2025, is a relatively new fund. The fund has a very short operating history, which limits a meaningful long-term performance assessment.

As of 31 January 2026, the fund's AUM stood at Rs 8.77 bn. The scheme's expense ratio (Direct Plan) is 1.20%, which is very high.

The scheme's equity allocation is 94.62%, followed by cash equivalents (5.38%).

Large-cap stocks accounted for 61.08% of the portfolio, followed by mid (23.89%) and small (15.03%).

The portfolio is concentrated, with Materials accounting for 33.02%, followed by Consumer Discretionary (25.57%), Industrials (14.37%), Healthcare (7.2%), and Financials (5.34%).

The top 10 stocks account for 48.55% of the portfolio, reflecting a concentrated portfolio.

Mahindra & Mahindra has the highest weight of 8.5%, followed by Ultratech Cement (6.31%), Torrent Pharma (5.63%), and Bajaj Auto (4.65%).

The fund also holds around 4.52% in Grasim Industries.

The scheme's PE multiple of 37.81 is at a premium to the Nifty 500 TRI (23.9). The portfolio turnover ratio is moderate at 0.04, indicating a buy-and-hold strategy.

Source: ACE MF

Bottomline

India's textile sector is in a supportive phase, backed by tariff reductions in the US and EU, export-focused policy measures, and sustained government spending.

Diversified funds generally hold textile stocks as part of a broader portfolio, leading to differences in exposure levels and risk compared with other strategies.

Narrowly themed or newer schemes, on the other hand, often show higher valuation sensitivity, more return fluctuations, and shorter track records, even though the overall sector environment remains supportive.

Risk appetite, investment horizon, and portfolio diversification play an important role in how different fund strategies fit within portfolios.

#Table Note: Data as of 03 February 2026
Rolling period returns are calculated using the Direct Plan-Growth option.
Returns over 1 year are compounded annually.
Standard Deviation indicates risk, while the Sharpe ratio and Sortino ratios measure risk-adjusted return.
They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
The category average of all midcap mutual funds considered.
Please note that the returns here are historical.
The funds listed at the top of the table are ranked by 5-year returns. The list of schemes is not exhaustive.
Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendations.
Speak to your investment advisor for further assistance before investing.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully.