Some of the most impacted have been the passive schemes, based on defence index, PSU index, tourism index, metal index and some momentum-based strategies. Their NAVs are between ₹8 and ₹9 now. While the decline in defence and PSU stocks began in July, the drop precipitated from September 27 when the broader sell-off commenced triggered by strong foreign institutional outflows.
In this period, the Nifty 50 fell 10.44%, the Nifty Midcap 150 fell 10.9%, while the Nifty Smallcap 250 fell 9.1%. The Defence index dropped 10.25%, the PSU index shed 11.7% and the Metal index declined 12.28%since September 27.
“While the pain is across the board, it is more visible in some of the new fund offerings, especially index funds, which have been around popular themes where there were valuation concerns,” says Nirav Karkera, head of research at Fisdom.
AgenciesMutual funds had launched these schemes when many of the themes such as defence and PSUs had already returned more than 100% in the preceding year. The new fund offers (NFOs) attracted several first-time investors led by high-decibel marketing and higher payouts to distributors partly on the perception that there was not much to lose while subscribing to an NFO at par value. NFOs have mobilised ₹1.08 lakh crore in the last 12 months.
The losses may call for a reassessment of holdings. “Investors with high allocation to thematic funds who do not have any conviction are better off exiting them and moving to diversified equity funds,” says Viral Bhatt, founder, Money Mantra. “Narrow thematic funds are for aggressive investors, who should allocate only 5% of their portfolio to such bets in a staggered manner with a time frame of around 7 years.”
