A QUICK TOME ON MF SECTOR PREFERENCES

A QUICK TOME ON MF SECTOR PREFERENCES

Before we gauge the sectoral preferences of mutual funds for the month of June 2026, here is a quick look at the macro picture. Total equity AUM of Indian mutual funds stood at ₹53.84 trillion as of June 2026. This reflects a growth in AUM of 3.42% over May 2026 and a growth of 13.04% over the last 1 year. Here, AUM refers to the overall AUM of stocks held in equity funds, hybrid funds, and passive funds. Now for the MF sector preferences!

How did we arrive at the sector preference rankings of mutual funds for June 2026?

As a first step; sector preferences are ranked on 4 parameters; MOM change in absolute AUM, MOM change in % AUM, YOY change in absolute AUM, and YOY change in % AUM. Sectors are ranked individually on each of these 4 parameters.

The next step was to eliminate sectors that were not too significant in size. In this case, our cut-off was, latest AUM of minimum ₹10,000 crore. Very small sized sectors could distort the rankings. Only 26 sectors that met these conditions were considered.

The combined rank was calculated as the arithmetic average of ranks on the four parameters laid out in the first point. The sector with the best combined rank was placed on top and the sector with the worst rank was placed at the bottom. Only the top-15 sectors are presented here out of the 26 eligible sectors considered.

The reason for combining these 4 parameters is to combine the secular performance and the momentum of sectors. At the same time, we have also tried to factor in size or significance on one side and actual growth traction on the other.

SECTORAL PREFERENCES OF MUTUAL FUNDS – JUNE 2026

Here is a quick snapshot of sectoral preference ranks of Indian mutual funds for June 2026.

Here are some key takeaways from the sectoral rankings above.

Retail has emerged on top in terms of MF buying interest and market performance. This includes traditional retail and digital retail. The segment has been attracting a lot of buying interest (being a domestic-demand driven sector), it is less vulnerable to geopolitical risk. That has made retail the top pick for Indian MFs in June 2026.

Other sectors in the top-5 have their own specific stories. Shipping & logistics is a beneficiary of higher freight rates. Pharma continues to be a defensive bet on the Indian economy, while diamond jewellery has gained from a revival in export demand. The surprising inclusion is aviation, which has done well despite profit concerns.

Some sectors in the centre have taken a hit on higher geopolitical risk. Banking is seen as exposed to higher bad loans amid rising uncertainty. Also, capital goods are less preferred due to companies going slow on capex plans. Even automobiles have been hit by the supply chain constraints emanating from geopolitical risk.

There are some sectors that appear to have gone out of favour in June 2026. Realty is facing some serious questions over still valuations, while the power sector is facing questions over input costs and consistent supplies. Textiles have seen tepid export performance, and that has led to this sector ranking lower in the pecking order.

There were some big sectors at the bottom. Again, FMCG, Oil & Gas, and IT Services are ranked at the bottom. While IT is being hit by cautious tech-spending, FMCG is facing sharp input inflation. Oil & Gas is seeing most of the pressure downstream with OMCs staring at rising under-recovery losses in petrol and diesel.

Unlike in the previous months, the story in June 2026 is not just about the domestic plays. The markets are betting that even if the geopolitical risk continues, the impact of the overhang would be limited. That is a positive sentiment to begin with!