The Indian mutual fund industry witnessed a milestone in July 2025 as new fund offers propelled thematic and sectoral fund inflows to unprecedented levels. According to data, the month recorded a massive Rs 30,416 crore mobilized through new fund offers, with thematic and sectoral categories alone contributing Rs 7,404 crore. This marks a staggering 1,800 percent increase compared to the previous month, underscoring the renewed appetite for focused investment strategies despite recent underperformance in several themes.
Seven new thematic and sectoral funds hit the market during July, three of which were factor-based strategies. Among them were the Axis Services Opportunities Fund, Bandhan Multi-Factor Fund, HDFC Innovation Fund, ICICI Prudential Active Momentum Fund, Mahindra Manulife Banking and Financial Services Fund, Nippon India MNC Fund, and Sundaram Multi-Factor Fund. Collectively, these offerings attracted significant attention from both retail and institutional investors, highlighting a willingness to take concentrated bets in specific sectors and investment styles.
Industry experts, however, urge caution. Many factors, including momentum, value, low volatility, and quality, have lagged behind broader market indices in recent months. Rohit Beri, founder of quantitative investment firm ArthAlpha, noted that momentum has been the weakest performer, while value and low-volatility factors have fared slightly better but still failed to outperform the benchmark. He emphasized that single-factor strategies often work better through exchange-traded funds, given their cost efficiency and transparency.
At the launch of the DSP Nifty500 Flexicap Quality 30 Index Fund, Kalpen Parekh, the company’s managing director and chief executive officer, pointed out that quality as an investment factor is currently at its lowest return level in five years when compared to the index. This, he argued, makes counter-cyclical investing all the more important, as chasing recent winners may not always yield the best results.
The surge in inflows also reflects a growing sophistication among investors who are exploring opportunities beyond plain-vanilla equity funds. However, Beri cautioned that thematic funds require deep macroeconomic understanding and active asset allocation skills, making them more suitable for experienced investors rather than those new to the market.
While July’s numbers showcase remarkable enthusiasm, the performance of these funds over the coming quarters will determine whether the current wave translates into lasting investor confidence or becomes another short-lived trend. The challenge lies in timing both entry and exit correctly, as thematic and sectoral bets can swing sharply based on global and domestic market developments.
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