India’s mutual fund market continues its stellar growth, with sectoral and thematic funds emerging as top performers. In parallel, hybrid funds have crossed the significant milestone of Rs 10 trillion in assets under management (AUM), highlighting the increasing investor appetite for diversified investment strategies.
Sectoral and Thematic Funds: The Rising Stars
Sectoral and thematic funds have consistently outperformed other mutual fund categories, as investors seek targeted exposure to specific high-growth industries such as technology, banking, healthcare, and infrastructure. These funds, which focus on a particular sector or theme, contributed a whopping 38.54% of total equity net sales in 2024. September alone witnessed gross sales of Rs 21,917 crore, driven by strong inflows into new fund offers (NFOs).
Top-performing funds, such as those targeting rural consumption and infrastructure, have delivered impressive returns. For instance, the Sundaram Rural and Consumption Fund has provided 32.6% returns in the past year. Additionally, the Franklin Build India Fund, which focuses on infrastructure, posted a remarkable 51.1% return in 2023, continuing to attract a significant number of investors.
Hybrid Funds: AUM Milestone Reached
Hybrid funds, which blend equity and debt allocations, are witnessing strong inflows as they offer balanced risk-adjusted returns. As of September 2024, the hybrid funds category saw net sales of Rs 5,134 crore, with AUM touching the Rs 10 trillion mark, representing a significant milestone in the mutual fund industry.
This category’s dynamic asset allocation funds, which adjust exposure between equity and debt based on market conditions, stood out with an AUM of Rs 2.5 lakh crore. These funds have become a favorite among investors looking to navigate market volatility while maintaining a diversified portfolio.
Performance of Other Mutual Fund Categories
- Equity Mutual Funds: Equity funds have recorded stellar growth, with a 62.93% increase year-on-year. The equity AUM surged to Rs 31.15 lakh crore, driven by high inflows into sectoral and thematic funds. Mid-cap and small-cap funds, in particular, continued to draw interest, with net inflows exceeding Rs 40,000 crore during the fiscal year.
- Passive and ETF Funds: The growing interest in Exchange-Traded Funds (ETFs) and passive index funds is also noteworthy. ETF AUM saw a rise of 45.43%, driven by institutional flows. With an AUM of Rs 6.64 lakh crore, ETFs remain a key choice for investors seeking low-cost exposure to various indices.
- Debt Funds: Despite a turbulent year for the debt market, debt funds managed to post 7% year-on-year growth. This segment witnessed a rise in money market and liquid fund inflows, despite outflows in long-duration funds due to fluctuating interest rates.
Conclusion: Robust Growth Across Categories
The Indian mutual fund industry continues to present a wide array of opportunities for all types of investors. Sectoral and thematic funds have outperformed, catering to those seeking targeted sectoral exposure, while hybrid funds continue to attract investors looking for a balanced approach. With AUM across different categories reaching new highs, the mutual fund space remains one of the most dynamic sectors of India’s financial markets.
