Thematic and sectoral funds have witnessed an inflow to the tune of Rs 22,837 crore, next to only small-cap funds in the past one year, of which 75 per cent came through new fund offers (NFOs). The maximum inflow into sectoral/thematic funds was seen in the Sept quarter at Rs 9,387 crore. In August too theme-based funds secured the top position in terms of flows, amassing Rs 4,805.81 crore, buoyed by NFOs.
Mutual fund (MF) schemes that focus on a particular sector or an investment theme, have emerged as the most popular investment option for first-time millennial investors since the financial year (FY) 2021, as per a report by CAMS, registrar and transfer agent (RTA). At least 21 per cent of new millennial investors kickstarted investing in MFs by choosing to invest in thematic and sector fund schemes for up to FY ending on March 31, 2023.
While sector funds tend to focus on domains such as banking, pharma, information technology, fast-moving consumer goods (FMCGs), etc, and invest in stocks in one specific sector, thematic funds focus on themes and invest in stocks in sectors that are linked to the theme.
Following this trend, Kotak Mutual Fund has launched an NFO under its “equity category”, named as Kotak Consumption Fund. The investment objective of the scheme is to generate long-term capital appreciation from a portfolio that is invested predominantly in equity and equity related securities of companies engaged in consumption and consumption-related activities.
The fund will invest in the sectors/industries like Fast Moving Consumer Goods, Financial Services, Automobiles and Auto Components, Consumer Durables, Telecommunication, Consumer Services, Health Care, Power, Realty and Textiles etc., which form the Consumption universe based on the investment strategy of the scheme.
“The fund will offer investors an opportunity to invest in India’s consumption potential, which is being driven by the trinity of structural, cultural and digital factors. The structural growth is led by a shift towards organized markets due to urbanization and rising incomes. Increasing discretionary spending due to the rise of nuclear and aspirational families is creating a cultural influence, leading to higher consumption. This is further propelled by a digital impact leading to a surge in online shopping and internet usage,” said the company in a release.
The NFO is available for subscription from October 25 to November 8.
The fund offers systematic investment solutions like SIP and SWP to create a flexible investment plan. The minimum subscription amount is Rs 5000/- and in multiples of any amount thereafter.
The fund will be managed by Devender Singhal who has been with Kotak Mahindra AMC with over 15 years.
“Country’s consumption story is still unfolding. The consumption potential is driven by our country’s rising income, strong digital revolution, unique demographic makeup, and changing consumer trends. The Kotak Consumption Fund offers investors an avenue to participate in our nation’s aspirations, targeting investments in the opportunities within the resilient consumption sector,” said Devender Singhal, EVP, KMAMC.
The scheme will invest 80-100% in equity and equity-related securities of companies engaged in consumption and consumption related activities, 0-20% in equity and equity related securities of companies other than those engaged in consumption and consumption-related activities, 0-20% in overseas mutual funds schemes / ETFs / foreign securities, 0-20% in debt and money market securities, and 0-10% in units of REITs & InvITs .
Currently, there are around 13 schemes based on consumption theme, of which 12 schemes have offered around 24.14% average return in three years.
“It’s true consumption funds have exceeded our expectations, and India’s consumption story remains upbeat. However, we’d still like to stick with relatively-safer diversified mutual fund options, such as flexi-cap funds, as they can choose from a larger pool of quality stocks,” said Ashish Menon of Value Research.
Apart from Kotak, Bajaj Finserv has also launched a debt fund in the Banking and PSU space. It is an open-ended debt scheme predominantly investing in debt instruments of banks, public sector undertakings, public financial institutions and municipal bonds with relatively high-interest rate risk and moderate credit risk.
The new fund offer is open for subscription and will close on November 6.
The scheme will be benchmarked against NIFTY Banking & PSU Debt Index. The scheme will be managed by Siddharth Chaudhary, Nimesh Chandan.
The investment objective of the scheme is to generate income by predominantly investing in debt and money market securities issued by Banks, Public Sector Undertaking (PSUs), Public Financial Institutions (PFI), Municipal Bonds and reverse repos in such securities, sovereign securities issued by the Central Government and State Governments, and / or any security unconditionally guaranteed by the Govt. of India.