Themes Of Choice

As Savvy Investors Seek New Avenues, Thematic Mutual Funds Are Gaining Popularity

- NACHIKET KELKAR

Mutual funds have taken off in a big way in the past few years. The surge started when central banks slashed interest rates during the Covid-19 pandemic, making investors chasing high returns turn to capital markets, either investing directly or via mutual funds. Interestingly, this phenomenon has survived the high interest rate phase of the past two years, and more and more investors are investing in equity now.

The latest data from Association of Mutual Funds of India (AMFI), says average assets managed by the Indian mutual fund industry was ₹66.04 lakh crore in August 2024, a 40 per cent jump over August 2023 when it was ₹46.94 lakh crore. Equity-oriented schemes now account for about 60 per cent of the industry assets, up from 52.7 per cent in August 2023.

Between January and August 2024, the total net inflow into equity mutual funds has been around ₹2.48 lakh crore. Just in August, some 64 lakh new systematic investment plans (SIP) were registered and the monthly SIP contribution hit a new high of ₹23,547.34 crore. While August was the 42nd consecutive month of positive equity inflows, one category of funds seems to have attracted a lot of interest this year—sectoral/thematic funds.

Sectoral funds are equity mutual funds that focus on businesses operating within a specific industry, like technology, health care, defence, energy, automobile, or financial services. There are funds that focus on specific themes like consumption, manufacturing, infrastructure or clean energy as well.

Such funds have received around ₹1.03 lakh crore in net inflows between January and August. What is driving this huge interest?