Thematic funds leading a speculative bubble: Why SEBI needs to check the rise of this unsustainable frenzy
Sebi intervened to keep smaller investors from speculating recklessly. However, another binge, playing out concurrently, seems to be flying below the regulator’s radar.
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Thematic funds sold like hot cakes in 2024 as AMCs hawked differentiated and exotic themes to investors chasing returns. Seduced by compelling narratives woven around fancy new sectors and themes, investors pumped in close to Rs.80,000 crore in these new fund offers (NFOs). The party initially kicked off with more diversified offerings, targeting broader investible ideas like business cycles, special opportunities and innovation, among others. With the stock market gliding along merrily, AMCs have become more imaginative and investors more adventurous. Newer thematic funds have adopted increasingly focused, narrow ideas. From housing, defence and manufacturing, NFOs have moved on to target themes like tourism, electric vehicles, rural opportunities, conglomerates, among other flavours. Among latest offerings, funds are targeting ideas like railway PSUs and premium consumption.
Thematic offerings are being sold aggressively
Several AMCs have pushed narrow, exotic themes to investors in recent years.
Paradoxically, the ongoing thematic NFO rush owes its origins to the regulator’s own missive to AMCs. In
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