Even as the equity markets are facing continued pressure due to elevated valuations and trade uncertainties, investors continue to subscribe to the thematic stories sold by mutual fund houses.
Data from Value Research shows that 43% of equity schemes both active and passive launched in 2025 so far are either sectoral or thematic. In 2024, they had made nearly 40% of the total equity NFOs.
Nehal Meshram, senior analyst, Morningstar Investment Research India said that fund houses are launching these funds that are currently in the spotlight and people are likely to invest. “So overall, the timing works well for fund companies to grow their business and give more options to investors but for investors, it’s better to be cautious,” she added.
In July, NFOs garnered a record high amount of Rs 30,416 crore and seven in the thematic and sectoral category contributed Rs 7,404 crore to it. This amount is 78.5% of the total Rs 9,426.03 crore inflow in the category, up 1800% from last month.
The regulatory limits imposed by SEBI restrict fund houses to launching only one fund per category under the core active equity classification (like large cap, flexi cap, etc.), prompting them to turn to thematic, sectoral, and index funds categories that fall outside these caps.
Exchanges are also launching the indices in consultation with Mutual Fund companies as it gives them a new line of business, as they are able to earn around a percentage point of the assets collected by schemes, based on their indices.
These schemes are similar to the active funds which fund houses already have. For example, a mutual fund has recently launched a passive flexicap fund based on Nifty500 Flexicap Quality 30 Index Fund. Meshram said these are for investors seeking low-cost, transparent, and rule-based investment options. For AMCs, these products are operationally efficient and scalable, while also helping diversify product basket and stay relevant in a competitive marketplace, she added.
At the same time, he noted that many schemes in the index fund category are based on similar themes like PSU, infra, or momentum. She said: “Even if the names are different, these funds often end up owning many of the same stocks because they all pick from the same group of large, well-known companies. So, if an investor puts money into multiple such funds thinking they are diversifying, they may actually be holding the same stocks again and again. It’s important for investors to review holdings and avoid crowding into similar strategies, even if the fund names sound different.
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