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Sectoral/thematic funds have gained a lot of traction. In fact, the fund category received record inflows of Rs.19,200 crore in May. As a result, sectoral/thematic funds command the second highest position in the MF industry after flexi cap funds with AUM of Rs.3.37 lakh crore.
In FY 2023-24, 37 NFOs thematic/sectoral were launched. In such a scenario, it is critical for MFDs to know which sectors or themes can do well in future.
Cafemutual spoke to industry experts to understand how MFDs can choose the right sector for their clients.
Anupam Tiwari, Head - Equity, Groww Mutual Fund believes that MFDs should look at demand cycle to shortlist sectors or themes. For instance, if rural demand picks up, it will benefit FMCG and automobile sectors. Similarly, if urban demand goes up, consumption theme will do well.
Rahul Singh, CIO, Tata MF is of the opinion that MFDs should look at valuations and earnings growth to narrow down the sectors. He said that MFDs should avoid falling prey to value traps that sectors/themes offer.
Sumit Bhatnagar, Fund Manager, Equity, LIC Mutual Fund points out the MFDs should look at government policies to shortlist sectors or themes. Giving an example, he said that infrastructure funds can do well if the government increases capital expenditure.
Bhatnagar also recommends MFDs to look at global macro trends as it plays a key role in determining the success of any sector or theme.
