Mutual funds are the most trusted investment instruments for retail investors. A little over 14.42 crore folios and Rs 40.68 lakh crore asset under management (as on Feb 28, 2023) is the testimony of investors' faith in the mutual fund. Systematic Investment Plan(SIP), the preferred mode of investing in MF by retail investors, is also near an all-time high, with assets under management (AUM) at Rs. 6,74,414 crore in February 2023 versus Rs 6,73,774 crore in January. As an investor, you should know where your money is invested, considering the current market turmoil. Here is a sectoral analysis of how funds are invested.
Mutual Fund Allocation Across Sectors
As per data compiled by the prime database, in February, the financial services industry sector held the largest share of mutual fund investments (32.11 per cent), a decrease of 0.12 per cent from January. The sector comprises banking, insurance, credit rating agencies, and asset management companies (AMC). The large portfolio allocation in this sector is not surprising, as financial firms have significant exposure in indices such as Nifty and Sensex. The banking and financial sector is considered the backbone of the economy and offers higher growth opportunities to investors.
Consumer discretionary ranks second with a 15.57 per cent share, a marginal increase from January. This sector encompasses wants rather than needs, viz, apparel, leisure equipment, hotels, restaurants, and consumer retailing.
Sectors With Most Buying
In February 2023, mutual funds primarily purchased stocks in the energy, fast-moving consumer goods, and information technology sectors.
Among the most notable changes was the deployment of investments from mutual funds of Rs 2,127 crore into the energy sector. By giving tax exemptions on EV loans, the government of India has boosted the electric vehicle sector. As a result, the energy sector has received an impetus, which has been further strengthened by the Renewable Energy Investment Promotion and Felicitation Board. Furthermore, technological improvements have also played a part in the growth of this sector.
In the IT sector, growth in e-commerce, expansion of 5G mobile networks, the Make in India program, and the government's thrust on IT-enabled services have bolstered investor sentiment. Mutual fund investments in this sector totalled Rs 2,23,993 crore in February, an increase of Rs 1,175 crore from January.
FMCG products are currently gaining ground as a long-term safe investment, with mutual fund investments in this sector increasing by 0.16 per cent in February. From US$ 110 billion in 2020, the FMCG market in India is expected to reach US$ 220 billion by 2025 at a compound annual growth rate of 14.9 per cent. In cities and rural areas, the growth of digital connectivity is driving the demand for FMCG (through e-commerce portals).
The services sector continues to be one of the sectors with the least industry exposure from mutual funds. The service sector received only 1.36 per cent of total mutual fund investments, a slight decrease from the allocation in January.
The performance in all these sectors will contribute to the performance of your mutual fund schemes in the long term.
