Small investors turn thematic!

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Small cap mutual funds and sectoral or thematic funds seem to be favourites of retail investors who had entered the stock market after the whole Covid-19 saga. These two particular categories of mutual funds have garnered maximum funds since the government had imposed stringest lockdown in the history of the country back in 2020 to curve Covid-19 pandemic cases.

Net asset under management (AUM) of small cap funds has ballooned to Rs 2.20 lakh crore in November 2023 from Rs 69,000 crore in March 2021. The net AUM of this category of mutual fund has increased 218 per cent within this period.

The period from March 2021 to November 2023 has been taken into account because this time frame has been remarkable for equity mutual funds. Retail investors have gone so berserk on equities that, investment in equity mutual funds has been positive continuously since March 2021 on net basis. During this time period, not a single month has seen outflow of money from equity mutual funds on net basis.

As far as, sectoral or thematic mutual funds are concerned, its net AUM too has more than doubled during the same period. The net AUM of thematic funds jumped 142 per cent to Rs 2.37 lakh crore in November 2023 from Rs 98,000 lakh crore in March 2021.

The net AUM, in case of both small cap and sectoral funds has more than doubled after Covid-19.

Riding on the wave of heavy investment in these two categories of mutual funds, the net AUM of all categories of equity mutual funds be it large cap or multi cap or any ther category for that matter has also more than doubled in last 2 years and 8 months. The net AUM has jumped 107 per cent to Rs 20.33 lakh crore in November 2023 from Rs 9.79 lakh crore in March 2021.

It will be interesting to see how long retail investors’ newly found love for equity mutual funds continue or is the party has just begun for equity investing in India?