Mutual funds decoded: What sectors and stocks are fund managers betting on?

After months of caution, the Nifty gaining 6.3% month-on-month (MoM) in March 2025—its best performance since July 2024. Despite global volatility and fluctuating FII sentiment, domestic investors continued to power mutual fund growth. The equity assets under management (AUM) of mutual funds rose 26% year-on-year (YoY) to Rs 32.3 trillion in FY25, supported by:

• Market index gains (Nifty: +5% YoY)
• 65% YoY rise in gross sales of equity schemes (Rs 9.4 trillion),
• A record net inflow of Rs 4.76 trillion in FY25—more than double last year.
• Total industry AUM soared 23% YoY to Rs 65.7 trillion, marking the fifth consecutive year of expansion.

 

SIPs continue to flow, despite month-on-month dip

 

Systematic Investment Plans (SIPs), the preferred route for retail investors, remained resilient. March 2025 saw contributions of Rs 259.3 billion, a marginal dip MoM but up 34.5% YoY, said Motilal Oswal in a report.

 

Shifts in Sector Allocation: What fund managers are betting on, as per an analysis by Motilal Oswal:

• Mutual fund portfolios saw significant rebalancing in FY25:
• Defensive sectors like Telecom and Healthcare gained traction, with the latter moving up to the fourth-largest holding by weight (7.6%).
• Private Banks surged to the top slot with 18.4% share, while PSU Banks saw a decline to 2.8%.
• Domestic cyclicals like Insurance, Real Estate, and Infrastructure increased their weight to 61.5%.
• Global cyclicals, particularly Oil & Gas, saw reduced allocation.

 

In March alone, fund managers increased exposure to Capital Goods, Utilities, Oil & Gas, Cement, and Insurance, signaling confidence in India’s domestic growth story.

 

Top Fund Houses ride the wave:

Among the top 10 AMCs, these funds posted the highest MoM growth in equity AUM:

• Nippon India MF: +9.6%
• Axis MF: +8.3%
• Kotak Mahindra MF: +8.0%
• DSP MF: +7.8%
• UTI MF: +7.5%
• The top sectors where MF ownership vs. the BSE 200 is at least 1% higher: Healthcare (17 funds over-owned), Consumer Durables (12 funds overowned), Chemicals (11 funds over-owned), Capital Goods (10 funds over-owned), and Retail (10 funds over-owned).
• The top sectors where MF ownership vs. the BSE 200 is at least 1% lower: Consumer (17 funds under-owned), Oil & Gas (17 funds under-owned), Private Banks (16 funds under-owned), Technology (12 funds under-owned), and Utilities (12 funds under-owned).
• Among the Nifty50 stocks, highest MoM net buying in March 2025 was seen in Jio Financial (+18%), Tata Consumer (+12.8%), Eternal (+10.2%), and Bajaj Finserv (+7.5%).
• Among the Nifty Midcap-100, highest MoM net buying in Mar’25 was observed in Yes Bank, HUDCO, IDFC First Bank, Patanjali Foods, and Hindustan Zinc.

   

Investor Takeaway: What This Means for You

For individual investors, the data paints a clear picture:

 

• Stick with SIPs: Volatility may persist, but disciplined investing is paying off.
• Diversify with domestic cyclicals: The shift by fund managers indicates confidence in India’s core growth sectors.
• Review sector exposure: Consider rebalancing toward Healthcare, Capital Goods, and select Financials, where fund allocations are rising.

Some interesting facts

 

• The year saw a notable change in the sector and stock allocation of funds. The weight of defensives improved 30bp to 29.7%, aided by an increase in the weights of Telecom and Healthcare, while the weights of Consumer, Technology, and Utilities moderated 
• The weight of Domestic Cyclicals too increased 30bp to 61.5%, led by Banks-Private, Retail, Insurance, Real Estate, Infrastructure, and Cement.
• Global Cyclicals’ weightage declined 70bp to 8.7%, dragged down by Oil & Gas.
• Healthcare saw a rise in weight to 7.6% (+20bp YoY) in FY25, improving its position to fourth from fifth a year ago.
• Technology’s position remained unchanged over the last one year, while its weightage declined by 20bp YoY to 8.5%.
• Private Banks saw a surge in weight to 18.4% (+150bp YoY).
• PSU Banks witnessed a decline in weight to 2.8% (-60bp YoY).
• Capital Goods saw a decrease in weight to 7.2% (+70bp YoY).