A New Rise in Mutual Fund Investments: A Deep Dive into May 2025
Investment firms wager on the expansion of industrial and financial services sectors
Ananya Grover Follow Us
In May 2025, mutual funds showed a remarkable inclination towards the industrials and financial services sectors, leaving utilities lagging behind. Data revealing this trend comes from Prime Database's monthly MF Tracker.
Sizzling Sectors
Mutual funds' holding in the industrials sector soared by a staggering Rs 56,202.97 crore. The financial services sector followed closely with a rise of Rs 53,536 crore. In the consumer discretionary sector, holdings increased by Rs 45,295.70 crore, showing a steady upward trend. Notably, the utilities sector saw a reduction of Rs 3,392.10 crore, making it the only sector to experience a decrease in investments.
Market Dominance
At the end of May 2025, mutual funds accounted for 11.29% of the market capitalization of the industrial sector, compared to 9.80% in April. The financial services sector saw an increase in its share from 13.58% to 14.13%.
Stock Picks of the Month
HDFC Mutual Fund, in its May Factsheet, highlighted that despite the recent rally, the valuations of many sectors still remain below their historical averages, except for automobiles and private banks which are at a small discount.
In May, ITC was the most bought stock by mutual funds with a total net investment of Rs 8,009.50 crore. Other heavily bought stocks included HDFC Bank, Eternal, Airtel, and IndiGo, whereas funds were net sellers of shares in Max Financial Services, FSN E-Commerce, Coromandel International, BSE, and Container Corporation of India.
Investment Strategies
Axis Mutual Fund reported favoring the financial sector, particularly NBFCs, in the current scenario. Although there has been a slight reduction in exposure to the pharmaceutical sector due to tariff and pricing concerns in the US, Axis Mutual Fund is maintaining an overweight position on this sector.
Investment advisors suggested that the discretionary segment is set to benefit from the strengthening domestic momentum. They also believe that lower interest rates and reduced tax rates might provide consumption a boost. Other favored themes include renewable capital expenditure, manufacturers, power transmission/distribution firms, and defense, with increased exposure to the defense sector in the last few months.
Mutual Funds: Beyond the Headlines
Although specific sector-wise breakdowns for mutual fund holdings in the Indian industrials and financial services sectors are not easily accessible, a broader understanding of mutual fund trends can offer valuable insights.
Key Mutual Fund Trends in May 2025
- Overall Assets: Mutual fund assets grew from ₹70.00 Trillion to ₹72.20 Trillion, with significant inflows into hybrid funds at ₹20,984 Crore.
- Equity Funds: Moderate inflows were observed into active equity funds, with a shift towards flexi-cap, multi-cap, small cap, and mid-cap funds.
- Sectoral and Thematic Funds: Performed exceptionally well in May, delivering returns up to 19.46%.
- Investor Composition: Individual investors accounted for 59.9% of mutual fund assets, while institutional investors held 40.1%.
Sources:[1] Moneycontrol[2] PopularInvestor[3] Business Standard[4] The Economic Times[5] Association of Mutual Funds in India (AMFI)
- The rise in mutual fund investments in May 2025 extended to the Defi sector, with various mutual funds expressing interest in exploring decentralized finance opportunities.
- In line with the market trend, diversification of portfolios was emphasized, with mutual funds recommending investments in a mix of stocks, bonds, and Defi protocols to minimize risk.
- The increased interest rate in the market has led some mutual funds to shift their investment strategies towards income-generating securities, such as government bonds and dividend-paying stocks.
- The business sector also witnessed the entrance of mutual funds as they looked to capitalize on growth opportunities in promising industries like renewable energy and electric vehicles.
- Despite the strong performance of the stock-market in May 2025, some mutual funds maintained a cautious approach, opting for defensive strategies that prioritize capital preservation over high returns.
