Mutual funds have seen a remarkable surge in interest, with thematic and sectoral new fund offers (NFOs) raising ₹43,236 crore over the last five months, a significant jump from just ₹6,946 crore in the same period last year. The rise in NFOs, which increased to 18 from 13, indicates a strategic shift among large fund houses to attract investors by offering innovative products beyond standard offerings.
The manufacturing theme has gained particular traction, with several fund houses, including HDFC MF and Invesco, launching related NFOs. Other popular themes include business cycles and special opportunities, driven by companies like Kotak MF and Edelweiss MF.
Thematic funds now account for ₹4.45 lakh crore in assets, marking a 42% increase, and have surpassed small- and mid-cap funds in growth. While small-cap and mid-cap funds saw increases of 20% and 22% respectively, thematic funds’ performance positions them as the largest equity category.
Diversification is Key Experts like Anil Rego emphasize the potential for high returns from thematic funds during sector booms, but caution against the risks associated with their lack of diversification. Manish Kothari suggests that these funds provide opportunities in emerging industries but advises that investments should align with individual asset allocation models for balanced risk management.
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