Investing in an active mutual fund scheme entails trusting your fund managers to invest your money in a profitable area that will provide you with higher returns.
Active large-cap mutual funds invested more of their funds in banks, IT, and crude oil. Here’s how much these sectors received and why
Investing in an active mutual fund scheme entails trusting your fund managers to invest your money in a profitable area that will provide you with higher returns.
According to the latest data from Accordfintech, the top-10 sectors where large-cap schemes have invested more are automobiles and ancillaries, banks, crude oil, finance, FMCG, healthcare, infrastructure, IT, and telecom.
Banking
Banks took the biggest slice of the cake, accounting for 25.17 per cent of the fund allocation.
The large allocation of large-cap schemes in this sector is not surprising, as financial firms have significant exposure in indices such as the Nifty and Sensex. With the banking sector being the backbone of the Indian economy, it offers better returns to investors. Despite the challenges posed by the pandemic, the banking sector has continued to perform well, with many banks reporting strong financial results and better non-performing assets (NPA) ratios in the past year.
IT Sector
The IT sector comes in second with 11.05 per cent investment. The allocation in IT sector is hardly surprising as it has been a consistent performer. With increased digitalisation and remote working in the pandemic era, this sector offers room for growth. In the IT sector, growth in e-commerce, expansion of 5G mobile networks, ‘Make in India’ program, and the government thrust on IT-enabled services (ITeS) have bolstered investor sentiment.
The IT sector was hammered due to global headwinds, and so they offer better opportunities as valuations are reasonable now. That’s why fund managers are also betting on this sector.
Automobile
The automobile and ancillaries sector comes in third with 7.56 per cent exposure. The rising logistics and passenger transportation industries are driving up demand for commercial vehicles. Future market growth is anticipated to be fuelled by new trends, including the electrification of vehicles, particularly three-wheelers and small passenger automobiles. By giving tax exemptions on EV loans, the Government of India has boosted the electric vehicle sector. Further, Government of India’s Automotive Mission Plan 2026, scrappage policy, and production-linked incentive scheme have also played a role in giving a boost to the sector.
Crude Oil, FMCG And Others
Automobile is closely followed by crude oil at 7.25 per cent. In March 2023, fuel consumption in India hit a record high due to the country’s robust economic activity. India’s demand for oil is expected to double and reach 11 million barrels per day by 2045, according to the India Brand Equity Foundation established by the Ministry of Finance.
The FMCG sector has received 5.99 per cent of the investment, while healthcare and infrastructure have received 4.87 per cent and 4.38 per cent, respectively.
The telecom and construction sectors have received the least amount of investment, accounting for only 2.84 per cent and 2.62 per cent respectively. Due to global macroeconomic and geopolitical conditions, the shortage of construction materials and hampered production of construction materials have impacted the industry and resulted in a rise in construction material prices.