The strong appetite has helped the theme and sector funds emerge as the largest category in terms of money managed among equity mutual funds, raising concerns that investors You could be chasing the latest fads in the market.
In the past three months, thematic and sector funds attracted around Rs 60,000 crore, of the Rs 1.12 lakh crore that flowed into equity mutual funds. This is now the largest equity mutual fund category, ahead of flexible cap funds, with assets of Rs 4.21 lakh crore, according to the Association of Mutual Funds of India (AMFI). The mutual fund industry managed equity money to the tune of Rs 28.5 lakh crore as of July 31. Most of the flows into thematic and sector funds are lump-sum investments in New fund offerings (NFO), mutual fund distributors said.
“The uninterrupted market rally over the last 1-2 years has given rise to a number of NFOs, particularly in the sectoral and thematic segments,” said Roshni Nayak, Founder, Goalbridge, a Sebi-registered investment advisory. “Retail investors are primarily investing in such NFOs, attracted by the spectacular rally in these themes.”
There have been a number of new fund offers (NFOs) in themes or sectors like manufacturing, energy, business cycle, special opportunities, defence and public sector companies. Among the large NFOs from top fund houses, HDFC Manufacturing Fund raised ₹9,500 crore, SBI Energy Opportunities raised ₹6,653 crore, SBI Automotive Opps ₹5,710 crore and ICICI Energy Opportunities ₹8,059 crore. Most of these NFOs belong to themes like defence, public sector companies and manufacturing, which have returned 90-120% over the last one year. Regulations stipulate that a fund house can have only one scheme in each category. Since large fund houses have exhausted their product range of diversified schemes, they are launching thematic and sector-specific funds. “Distributors get higher commissions in thematic funds “Diversified funds are more likely to be invested more,” said Kavitha Menon, a Sebi-registered investment adviser. She advises investors to be wary of thematic funds.Financial planners They are advising investors to stick to diversified equity schemes such as flexicap funds, which bet on a mix of large-cap, mid-cap and small-cap stocks, depending on the comfort of the money manager.
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