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Time of India
4 days ago
- Business
- Time of India
Sectoral & thematic mutual funds see record jump in inflows to over Rs 9,400 crore. Is it time to enter or stay cautious?
Live Events Sectoral and thematic mutual funds have witnessed a record jump in the monthly inflows to nearly Rs 9,426 crore in July registering a growth of 1,882% against an inflow of Rs 475 crore in to the latest data from Association of Mutual Funds in India (AMFI), much of this spike came from the seven new fund offers (NFOs) in the category, which collectively mobilised Rs 7,404 these funds received the highest inflow among the 11-sub categories under equity mutual funds, the market experts consider this surge due to NFOs mobilization which contributes to 78.5% of the increase.'The number of outflows also dipped by about 5% to Rs 8,666.60 crore. Major launches included Axis Services Opportunities Fund, HDFC Innovation Fund, Nippon India MNC Fund, etc,' Vishal Dhawan, Founder & CEO at Plan Ahead Wealth Advisors shared with on the valuation part, Dhawan mentioned that yes pockets of overvaluation do exist- In PSU, infra, defence, and manufacturing, trailing P/Es have moved far above long-term averages (e.g., PSU banks & defence stocks at 1.8–2x book value vs historical 1–1.2x; capital goods P/E >40x in some cases) and rally has been momentum-driven, with more flows chasing fewer large-cap names in these and thematic mutual funds which have continued to receive highest inflows for a very long time, received an inflow of Rs 170 crore in March against an inflow of Rs 5,711 crore in February. Since June 2023, the inflow in March was recorded as the lowest inflows in the April and May, these funds had started receiving inflows and again in June witnessed a sharp drop in the monthly inflows. In June, sectoral and thematic funds received an inflow of Rs 475 the current calendar year so far, these funds have received an inflow of Rs 28,853 crore and in the current financial year, these funds received a total inflow of Rs 13,955 FY25, sectoral and thematic funds received a total inflow of Rs 1.46 lakh crore of which highest inflow was received in June of Rs 22,351 crore. In March, Motilal Oswal Active Momentum Fund was the only sectoral or thematic fund which was launched and it collected Rs 40 recommending on whether one should consider investing in these funds or not, the expert said that the outlook varies by sector such as Banking and Financial Services, appearing attractive, having underperformed in the recent rally due to concerns over credit–deposit growth divergence, narrowing net interest margins, and asset quality issues and as these headwinds are now easing, supported by the RBI's liquidity measures and a favourable macroeconomic backdrop.'With the sector trading at a discount to historical valuations, it offers a compelling entry point for investors seeking stability with growth potential. In contrast, sectors like Defence, Infrastructure, and PSUs may enjoy favourable long-term growth drivers but are currently trading at elevated valuations, leaving little margin of safety,' Dhawan recommending the mode of investment, Dhawan explains that given the stretched valuations in many themes and the recent NFO-led liquidity surge, a SIP approach is better suited for sectoral/thematic funds at this stage as this allows participation if momentum continues while mitigating the risk of entering at a lastly, one should keep allocations modest within the overall portfolio and reassess after sector fundamentals and valuations are updated post-earnings and policy July, the benchmark indices were in the red zone. Nifty50 went down by 3.02%, Nifty Bank index was down by 2.60%. Nifty PSU Bank dropped by 5.55% in the similar time horizon. Nifty Midcap 150 - TRI and Nifty Smallcap 250 - TRI index were down by 2.57% and 3.37% respectively in the said the indices were in red, the important thing to know is that could this surge in inflows lead to short term volatility In response to this, Dhawan while mentioning about a study said that mutual fund inflows and outflows have an impact on market volatility and the research shows that large changes in flows whether buying or selling tend to coincide with heightened market fluctuations, and that this relationship holds even after accounting for broader trading activity.'When applied to sectoral and thematic funds, the implications are even stronger as these funds are typically launched during periods when their underlying theme is already performing well, attracting large amounts of investor capital and since the capital is deployed into a limited pool of stocks, the concentration risk amplifies price movements and heavy inflows can quickly push valuations higher, while any slowdown or reversal in flows can accelerate corrections.''Historical patterns underline this behavior — in infrastructure during 2007–08, PSU banks in 2014, and defense in 2022, sharp inflows led to short-term outperformance and heightened volatility, ultimately giving way to mean reversion once inflows subsided,' he of all sectoral and thematic fund categories, International funds offered an average return of 3.94%, followed by pharma and healthcare funds which gave an average return of 3.04% in July. And the last positive performer were MNC funds which gave an average return of 0.16% in the similar funds lost the most of around 4.22% in the said time period, followed by service industry funds which lost 3.04%. Auto sector funds lost the lowest on an average of around 0.11% in on the performance of sectoral and thematic funds, the expert recommends that as of now the Banking and Financial Services sector looks attractive as it has underperformed in the recent market rally due to concerns on divergence in credit and deposit growth, lowering of net interest margin ratio, and asset quality. However, these headwinds are now showing signs of should not make investment or redemption decisions based on the above exercise. One should always invest based on their risk appetite, investment horizon, and goals.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
Time of India
5 days ago
- Business
- Time of India
India's mutual fund industry sees record inflows in July: Equity and debt schemes thrive
Mumbai: India's mutual fund industry had a blockbuster July as equity and debt schemes attracted strong flows. Equity mutual funds raked in ₹42,702 crore in July - the highest contribution in a month - boosted by strong appetite for midcap, smallcap and new sectoral fund offerings. Systematic Investment Plan (SIP) collections were also at a record ₹28,464 crore compared with June's ₹27,269 crore, while debt funds saw flows surge to ₹1.07 lakh crore, led by investor interest in liquid and money market funds. The mutual fund industry's average AUM rose 2.6% to ₹76.74 lakh core from ₹74.79 lakh crore in June. Money pumped into equity schemes in July - the 53rd straight month of net inflows - surged 81% from June's ₹23,587 crore. "High returns from equities over the last three and five-year periods, low interest rates on bank deposits and high HNI appetite for diversified portfolios beyond direct equity are driving strong flows into equity mutual funds," said A Balasubramanian, MD and CEO, Aditya Birla SL Mutual Fund. Best MF to invest Looking for the best mutual funds to invest? Here are our recommendations. View Details » In equity schemes, investors allocated money across categories, with the highest amounts going into sectoral and thematic funds. They got ₹9,426 crore in July compared with a mere ₹475 crore in the previous month, buoyed by new fund offers (NFOs) from large AMCs such as Axis Services Opportunities Fund, HDFC Innovation Fund and ICICI Prudential Active Momentum Fund. Investors put ₹7,654 crore into flexicap funds, up from ₹5,733 crore in June. This was followed by large flows into smallcap funds, which got ₹6,484 crore against ₹4,025 crore in June, and midcap funds, which got ₹5,182 crore against ₹3,754 crore in the previous month. In the fixed-income space, liquid, money market and overnight funds had inflows of ₹39,355 crore, ₹45,474 crore and ₹8,866 crore, respectively largely due to NFOs from Jio BlackRock MF in these categories. Agencies Fixed-income Portfolios As institutional investors look to earn slightly more on their fixed-income portfolios, they are allocating more to money market funds over liquid funds, which have a marginally higher maturity than money market funds. "Fixed income is changing colour, with liquid funds seeing strong competition from money market funds," said Anand Varadarajan, chief business officer, Tata Mutual Fund. The hybrid category that invests in a mix of two or more assets, saw net inflows of Rs 20,879 crore, lower than the previous month's Rs 23,223 crore. "The dip in hybrid fund flows hints that investors are prioritising either aggressive equity plays or safe debt alternatives," said Ankur Punj, MD and national head, Equirus Wealth. Flows into arbitrage funds halved to Rs 7,296 crore from Rs 15,585 crore in the previous month, as spreads narrowed due to falling interest rates, putting pressure on returns. On the other hand, multi-asset allocation funds that invest in a mix of equity, debt and gold saw inflows rise 93% to Rs 6,197 crore from Rs 3,210 crore in June, backed by a Franklin Templeton NFO. Balanced advantage funds saw inflows of Rs 2,611 crore compared with Rs 1,886 crore in the previous month.
