Why thematic mutual funds saw record inflows in June

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In June, equity mutual funds recorded inflows of ₹40,573 crore. A significant portion of this surge can be attributed to sectoral and thematic funds, which collectively saw inflows worth ₹22,351 crore.

“This is the highest the category has ever seen over a month,” said Melvyn Santarita, Analyst – Manager Research, Morningstar Investment Research India.

The surge in thematic funds can be largely attributed to a few key factors:

New fund offerings (NFOs): The launch of nine NFOs played a crucial role in driving inflows.

These NFOs attracted significant investor interest, collectively bringing in ₹12,974 crore.

This influx highlights the market’s appetite for new and diverse investment opportunities.

Investor diversification: Investors are increasingly looking to diversify their portfolios by taking concentrated bets on specific themes.

According to Sandeep Bagla, CEO of TRUST Mutual Fund, “People are basically taking concentrated bets on specific themes… This is a good diversification in the sense that people are taking those specific bets for the next 3-5 years.”

Sectoral focus: Thematic and sectoral funds are drawing attention due to their focus on promising sectors like defence, consumption, and manufacturing.

These sectors are expected to benefit from upcoming budget announcements and policy changes, making them attractive to investors.

Distribution push: There is a notable push from the distribution industry towards new themes. This push, combined with investor confidence in specific sectors, has driven the inflow into thematic funds.

Bagla added, “The entire distribution industry is concentrating on the new themes, and people are very confident of themes like defence, consumption, manufacturing.”

Multi-cap funds also shine

In addition to thematic funds, the multi-cap category also saw significant inflows in June.

With net inflows amounting to ₹4,708.5 crore, it was the second highest among equity-oriented categories for the month and marked its third-highest net inflows over a monthly period.

This category was supported by the launch of the Motilal Oswal Multicap Fund, which alone garnered ₹1,051 crore.

Looking ahead

The strong inflows into thematic funds reflect a growing investor appetite for targeted investments in specific sectors.

This trend is likely to continue as investors seek to capitalise on anticipated policy changes and economic developments.

The focus on thematic and sectoral funds suggests a shift in investor strategy towards more specialised and potentially high-growth areas of the market.