As the Indian mutual fund industry grows rapidly, it is worth looking at the economic sectors they primarily target for investments and returns.
The mutual fund industry invests most of its capital in the financial services industry, followed by the consumer discretionary segment and others
As the Indian mutual fund industry grows rapidly, it is worth looking at the economic sectors they primarily target for investments and returns.
They usually invest in companies with high growth potential and cash flow prospects and compete for a piece of the pie both for the investors and the fund house.
The following are some sectors where mutual fund houses have allocated the largest chunk of their capital, as per data from Prime Database, a market data provider.
Financial Services
In October, mutual fund houses invested as much as Rs 5,490 crore in the financial services industry, comprising banking, insurance, credit rating agencies, and asset management companies (AMC).
As the saying goes, in the casino world, the house always wins; similarly, the finance industry is considered the winner—the backbone of industries. This is because financial firms provide vital capital to businesses either through loans or by buying their shares.
Thus, the sector is heavily invested in companies across the economic spectrum. Hence, it’s no surprise that mutual fund houses collectively owned 32.09 per cent, worth Rs 7.14 lakh crore, of the financial services industry, as of October 2022.
Consumer Discretionary
Mutual funds invested Rs 5,448.5 crore in the consumer discretionary sector in October. The value of their total holdings at the end of October stood at Rs 3.57 lakh crore. These companies offer customers discretionary or non-essential products and services, which include clothes, vehicles, vacations, media, and electronic products. Consumers typically buy these items or services when they have spare cash.
Information Technology
The Information Technology (IT) industry is critical for India’s economic growth, as it contributes the highest revenue generated through service exports. According to a report by India Brand Equity Foundation IBEA, in 2021-22, the IT industry’s total service exports stood at $250 billion. At the end of October, the mutual fund industry's share in the IT sector stood at Rs 2.20 lakh crore. In October alone, it invested Rs 1,967 crore in the IT industry.
Industrial
The industrial sector manufactures products for industrial purposes, such as energy generation and machine and engineering products used by various industries. The mutual fund industry collectively owns Rs 1.92 lakh crore worth of shares in the Industrial sector, with investments of Rs 2017.6 crore in October.
Commodities
Commodities, like stocks and bonds, are another asset class important for the mutual fund industry, which jointly owns Rs 1.70 lakh crore worth of shares in the commodities sector as of October 2022. They invested Rs 2,278.5 crore in October.
Most commodities are derived from the Earth and are mass-produced. Examples of commodities include steel, oil, gold, silver, wheat, and uranium—raw materials required by large manufacturing c