Sector funds like automotive (25.9 per cent), pharmaceutical (23.3 per cent) and information technology (21.8 per cent) are among the best-performing categories year-to-date among equity funds. Investors are flocking to them in large numbers. According to data from the Association of Mutual Funds in India (Amfi), these funds attracted inflows of Rs 4,805 crore in August, outpacing all other categories of mutual funds (MFs).
The allure of recent returns
One driving factor behind investors gravitating towards sector funds is recency bias. They are essentially getting drawn to categories that have exhibited strong performance in the recent past. “At any point of time, some sector funds display high past performance. Their returns often eclipse those of broader indices like