Thematic funds drive mutual fund growth in 2024, says Ventura Securities; these sectors saw most inflows

Sectoral and thematic funds have caught investors' fancy, garnering a staggering ₹1,09,711 crore in inflows, which is nearly 34 per cent of the total net collections, revealed a recent report by Ventura Securities. 

The report also noted that thematic funds experienced a remarkable 488 per cent growth in net collections from 2023 to 2024, highlighting the growing investor preference for targeted sectoral exposures.

Among the sectoral and thematic schemes, Business Cycle Funds saw a dramatic rise in net collections, reaching ₹6,841 crore in 2024, compared to just ₹103 crore in 2023. The Energy sector stood out as well, collecting ₹23,964 crore in 2024, a massive increase from ₹470 crore the previous year. Ventura Securities emphasised that the Manufacturing, Infrastructure, and Energy sectors together contributed 56 per cent of the total net collections in these funds, further signifying the increasing shift towards these critical industries.

Shifting Trends

Ventura Securities' report highlighted notable trends in large-cap and multi-cap funds. The large-cap funds saw a remarkable rebound, with net collections of ₹17,404 crore in 2024 compared to a negative ₹3,768 crore in 2023. Similarly, multi-cap funds and flexicap funds achieved net collections of ₹37,649 crores and ₹36,231 crores, respectively, underscoring the shift towards diversified equity exposure. However, small-cap funds experienced a decline in collections, dipping to ₹29,555 crore in 2024 from ₹45,270 crore in 2023, as highlighted by Ventura Securities.

Foreign and Domestic Investment Flows Reveal Diverging Trends

The foreign institutional investor (FII) flow for 2024 was largely negative, with a net equity outflow of ₹3.04 lakh crore, according to Ventura Securities. Despite FIIs pulling significant funds from the Indian equity markets, there were a few months of inflows, particularly in September. In contrast, domestic institutional investors (DIIs) played a stabilizing role, recording a net equity inflow of ₹5.27 lakh crore, with October alone accounting for a record ₹1.07 lakh crore. Ventura Securities pointed out that this sharp contrast in FII and DII flows showcases the resilience of domestic investors in the face of foreign selling pressures.

Performance of Sectoral Indices and AMC Schemes: Key Insights

In terms of sector performance, Ventura Securities observed that private sector banks underperformed in both 2023 and 2024, posting just a 0.4 per cent return in 2024. On the other hand, Defense emerged as the top-performing index with a solid 56.5 per cent gain in 2024, continuing its strong performance from 2023. Small-cap stocks also showed consistent strength, ranking in the top five for both years. Ventura Securities noted that PSU stocks posted an average return of 56.1 per cent in 2023, with Pharma topping the list in 2024, with a 40.5 per cent return.

As per Ventura Securities, the investment landscape of 2024 showcased a significant shift towards sectoral and thematic funds, with notable performance in the Defense sector and Energy. While foreign outflows continued to exert pressure on the market, domestic inflows helped maintain market stability. Additionally, the growth of thematic investments reflects a strategic shift by investors seeking specific sectoral exposure. 

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