In October 2024, the Indian stock market experienced notable volatility and almost 6 per cent dip owing to substantial foreign portfolio investor (FPI) outflows amounting to almost Rs 1 lakh crore.
The FII outflow was driven by concerns over high valuations and geopolitical tensions. As usual, large-cap stocks experienced the least impact, whereas small-cap stocks felt the highest impact.
When it came to mutual funds, sectoral funds were found to be the most affected.
Loss In Sectoral Funds
Sectoral funds can be vulnerable to losses if the sector they invest in takes a hit. This is because sectoral funds are only invested in one sector, even though they are diversified across companies.
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In recent market developments, sectoral mutual funds have faced significant declines ranging from 19 per cent to 10 per cent.
HDFC Defence Fund led the drop, declining by an alarming 19.21 per cent, where analysts had already given indication about froth in defense stock valuations. Following closely was the Quant PSU Fund, which fell by 16.04 per cent.
The Quant BFSI Fund also showed notable weakness, dropping 14.23 per cent.
Elsewhere, the Invesco India PSU Equity Fund experienced a drop of 13.95 per cent, and the Aditya Birla Sun Life PSU Equity fund declined 13.29 per cent.
The SBI Automotive Opportunities Fund witnessed a decrease of 13.08 per cent, as the auto sector made consistent losses throughout last week. The Bandhan Infrastructure Fund followed with a decline of 12.97 per cent, as the UTI Transportation and Logistics Fund declined 12.68 per cent. Similarly, the Aditya Birla Sun Life Transportation and Logistics Fund, and Quant Infrastructure Fund decreased by 12.17 per cent and 12.11 per cent, respectively.
