Mutual funds mop-up through thematic and sectoral new fund offers have hit a new high of ₹43,236 crore in the last five months of this fiscal against ₹6,946 crore mopped-up in the same period last year.
Large fund houses have been tapping the market with thematic funds as they exhausted the SEBI prescribed standard product offerings. In all, the number of thematic NFOs has increased to 18 in last five months against 13 in the same period last year.
Interestingly, manufacturing was the favourite theme with five fund houses including HDFC MF, Invesco, Motilal Oswal, Baroda BNP Paribas and Mahindra Manulife launching NFOs on that particular theme.
This apart, business cycle and special opportunities were the other two popular themes on which Kotak MF, Samco, WhiteOak Capital, Bank of India MF, Motilal Oswal MF and Edelweiss MF launched NFOs.
Backed by robust inflows through NFOs and market rally, the asset under thematic funds zoomed 42 per cent to ₹4.45 lakh crore in last five months. Thematic schemes emerged the largest equity category ahead of flexi-cap which had asset of ₹4.29 lakh crore.
In fact, thematic funds have overtaken the small- and mid-cap funds in terms of growth. Small cap funds asset was up 20 per cent at ₹3.19 lakh crore last month against ₹2.66 lakh crore in April, while in the same period mid-cap assets were up 22 per cent at ₹3.84 lakh crore (₹3.16 lakh crore).
Diversification is key
Anil Rego, Founder and Fund Manager at Right Horizons, said thematic funds might offer high returns during sector booms, but they come with significant risks due to lack of diversification.
Most fund houses are tapping into thematic funds as they allow them to introduce something new and exciting for investors, in line with emerging trends or government policies that could influence market performance such as infrastructure, defence, electric vehicles, and manufacturing, he added.
For sustained wealth generation and achieve financial goals, it is always advisable to diversify MF investments across categories which matches investors risk profile, he said.
Manish Kothari, Co-founder & CEO, ZFunds, said thematic funds offer investors an opportunity to invest in emerging industries with potential for high growth.
Since these funds run concentrated portfolios, he said investors stand to make higher than broader returns if the thematic growth story plays out and investors should invest in these funds to the extent of their asset allocation model.