Investors focus on sector funds amid rising volatility

Sectoral and thematic funds continue to draw investors’ interest. The net inflow in sectoral and thematic funds was Rs 11,084 crore in the past 12 months though the equity fund category as a whole had outflow of Rs 28741 crore according to the Association of Mutual Funds in India (AMFI) data. The net flow in sectoral funds was the highest among equity fund categories.

What works in favour of sector and thematic funds is their superior returns compared with conventional equity schemes. For instance, commodity focused funds were benefitted by a sharp rise in prices of ferrous and non-ferrous metals over the past few months. In addition, exotic fund offerings such as ESG (environment, social, governance) focused themes or pharma funds in times of pandemic have also been favourites among investors.

The sectoral funds had net inflow in nine out the past twelve months. Their gross purchases-to-redemption ratio was 1.7 in April 2021, the highest among equity categories. They added 9.8 lakh new folios in the past six months accounting for 40% of the whole equity fund category.


The assets under management (AUM) of the sectoral and thematic funds rose by 79% year-on-year to Rs 1.1 lakh crore at the end of April. The growth rate was faster than 50% for the AUM of overall equity funds. The sectoral funds account for 12.6% of the total equity AUM making it the third largest equity fund category after Large cap and flexicap segments.

The number of sectoral and thematic funds rose to 107 at April compared with 95 a year before. They constitute nearly 31% of the total equity fund schemes.

Over the past 12 months, eight sectoral funds delivered more than 100% return. At the top of the list was ICICI Pru commodity fund with return of 188% followed by Quant infrastructure fund with a return of 154%. In terms of the AUM, the Nippon India Pharma and SBI Magnum global funds are the largest funds according to AMFI data.