Investors betting big on higher-risk equity funds for better returns

Nearly one in two equity mutual fund (MF) accounts, or folios, are now in the three riskiest categories — sectoral and thematic, smallcap, and midcap funds — thanks to the growing penetration of online investment platforms and investors’ preference for top-performing funds. 

These categories have accounted for the bulk of new accounts in recent years. Since November 2022, sectoral, midcap, and smallcap funds have collectively added nearly 39 million folios, which is 65 per cent of the total additions to equity funds over the past two years. 

This surge has led to a major reshuffle in the folio pecking order,