Rise of theme-based funds captivates investors, draws over Rs. 22,000 crore in June
Sector and theme specific mutual funds have seen unprecedented popularity amongst equity investors in recent times. According to the latest data, these specialized funds witnessed a significant surge in investments last month, garnering a record net inflow of more than Rs. 22,000 crores.
Analysis shows theme-based schemes accounted for approximately 55% of total equity mutual fund inflows in June. This growing interest was further highlighted by new fund launches, with nine out of eleven fresh equity offerings falling under the sectoral/thematic category. Collectively, these nine funds were able to mobilize around Rs. 13,000 crores.
The first quarter of the current fiscal year also saw theme funds as the predominant choice, receiving the largest portion of equity inflows amongst all types of schemes. Their success stems from rising confidence in industries driven by supportive government policies and higher investments. However, thorough research remains essential before investing in any specialized option due to inherent concentration risks.
Sector and theme specific schemes focus investment in stocks and related assets from a particular domain or concept. Sector funds narrow down to industries like infrastructure, banking or pharmaceuticals, while thematic schemes cast a wider net over interlinked businesses under an overarching concept. Both require allocating at least 80% assets accordingly.
According to research data, some theme-based funds centering on banking, infrastructure, technology, consumption and renewable energy have generated double digit annual returns. Nonetheless, only risk-tolerant investors with long timelines should consider these focused vehicles due to volatility potential from macroeconomic shifts or outlook changes for targeted areas.
In conclusion, the massive subscription surge reflects growing acceptance of specialized investment avenues among equity investors. However, an in-depth evaluation of individual options remains imperative before inclusion in one’s portfolio.
