Sectoral, thematic mutual funds get substantial inflows. Should you invest?

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mutual funds in the past one year ending September 30, 2023. The mutual fund schemes witnessed an inflow to the tune of ₹22,837 crore, next to only small cap mutual funds and around 18 percent of the total equity inflows. Around 75 percent of the flows came through new fund offers (NFOs).

But what one would wonder is why did this happen? Wealth experts say that this is not an unusual phenomenon during a bull run. When the market index is on an upswing, it is common for investors to opt for a theme in a hope to beat the market. “After the Covid crash, the markets have been in a bull run.

And typically, many investors invest in whichever sector is doing well. Investors want to make the most of a bull run. If one category is giving, say 20 percent, investors want to invest in a theme which -- they think -- will do even better than that.

After all, a rising tide lifts all boats," says Amol Joshi, Founder of Plan Rupee Investment Service. “Some themes such as PSU and pharma have done well in the past six months. And even IT has done well to some extent.

This has perhaps led to an increase in the thematic and sectoral funds," says Sridharan S., a Sebi-registered wealth advisor and Founder of Wallet Wealth. At the same time, Vishal Dhawan, Founder and CEO of Plan Ahead Wealth Advisors, argues that this was primarily because of the new fund offers. “A large part of these inflows came came via NFOs and thus it is an indicator of the continued popularity of new fund offers, even though it may be ideal for investors to look at funds with established track records before they allocate capital," says Dhawan.