Prateek Agrawal on why sector and thematic funds are getting a larger part of monthly inflows

Prateek Agrawal, MD & CEO, Motilal Oswal Asset Management, says as performance changes, different cohorts perform, and the flows will come into those cohorts. So the destination will keep changing from time to time. Last month, a lot of money has gone into thematics or sectoral funds and it gets classified as such while a lot of them would have got a lot of mid and smallcap exposure. The trend today is that sector and thematic funds are getting a larger and larger part of monthly inflows. That is skewing the picture a bit. Also, larger funds have full product suite and can only expand in the thematic category.

What are you making of the AMFI data coming in – the SIP data, record high levels that we are hitting?
Prateek Agrawal: We believe domestic flows are very structural. It is evidence of India converting from a country of savers into a country of investors and we believe this trend will continue deep into the future.

But the trend now is that the mid and smallcap inflows have been moderating after three months of growth. There is a structural shift from mid and smallcaps to flexi-caps as a trend?
Prateek Agrawal: That can keep happening. I think as the performance changes, different cohorts perform, the flows will come into those cohorts and that can keep changing from time to time. That is how it was last month. A lot of money has gone into thematics or sectoral funds and that got classified as such while a lot of them would have got a lot of mid and smallcap exposure. The trend today is that sector funds, thematic funds are getting a larger and larger part of monthly inflows so that is also skewing the picture a bit.


A focus is there on thematic funds. Do you think that is a trend that we will be seeing picking up?
Prateek Agrawal: Yes, we do sense that most of the larger funds have the full product suite and if they have to expand it, it can only be done in the thematic category. So, thematic as a category should continue to see a lot of activity.

In terms of largecap funds, do you think that given the volatility in the markets because of the global scenario, there would be an increase in largecap fund inflows?
Prateek Agrawal: If largecaps start seeing earnings growth and the space performs stronger going forward, the same should happen. So, we believe the flows follow performance of the companies in terms of earnings growth. So, it is all linked in some manner.