THEME PARTY

FUNDS, SECTORAL MUTUAL FUNDS AMONG EQUITY AND THEMATIC RECEIVED THE SECOND-HIGHEST INFLOWS OF 30,841 CRORE IN 2023, ACCOUNTING FOR 19% OF THE TOTAL. THE GOVERNMENT'S FOCUS ON PSUs AND INFRA DEVELOPMENT IS EXPECTED TO HELP SUSTAIN THIS MOMENTUM

- RAHUL OBEROI

DUE TO THE combined impact of the government’s emphasis on public sector undertakings (PSUs), coupled with a thrust on infrastructure, sectoral mutual funds ended up receiving significant attention from investors last year.

This is evident from the fact that more than 19% of the funds invested in equity schemes were directed towards sectoral and thematic funds last year. These mutual fund schemes experienced an inflow of ₹30,841 crore, second only to small-cap mutual funds, which received a net inflow of ₹41,035 crore, or over 25% of the total equity inflows. Fund managers anticipate that sectoral funds will continue to attract robust flows, and sectors such as infrastructure, banking, housing, pharmaceuticals, and manufacturing appear promising for the next two to three years.

THE JOURNEY SO FAR

It is interesting to see that PSU funds outpaced other categories for the second straight year in 2023. On an average, mutual funds that zero in on public sector enterprises delivered 59.22% returns to investors last year and 26.51% in 2022. “The outperformance of the PSU space can be attributed to segments like PSU banks and defence,” says Vrijesh Kasera, Fund Manager at Mirae Asset Investment Managers (India). He adds that given the sharp run-up in both the segments, the valuations look expensive with respect to their historical averages. “While the rally may continue in the short-term, the earnings in both the segments will have to match up to justify the prevailing valuations.”

Among the top mutual funds in the PSU category, the net asset values (NAV) of Aditya Birla Sun Life PSU Equity Fund, Invesco India PSU Equity Fund, SBI PSU Fund and ICICI Prudential PSU Equity Fund gained somewhere between 55-62% in 2023.