MFs cut consumer exposure to 10-year low: 5 sectors fund managers are favouring instead

Mutual funds are steadily reducing their exposure to consumer stocks, with the sector's weight falling to a nearly 10-year low in August 2026. At the same time, fund managers increased allocations to healthcare, capital goods, e-commerce, insurance and NBFCs, signalling a shift in portfolio preferences.

The Consumer sector accounted for 5.3% of the portfolios of the top 21 domestic mutual funds in August, down 30 basis points month-on-month and 90 basis points from a year earlier, according to Motilal Oswal Financial Services' Fund Folio: Indian Mutual Fund Tracker. The report covers the top 21 mutual funds by equity exposure.

The decline is notable because consumer companies have traditionally been an important part of mutual fund portfolios. The latest data suggests fund managers are becoming more selective and are finding better opportunities in other parts of the market.

1. Healthcare

Healthcare has emerged as one of the biggest beneficiaries of this portfolio rotation. Its weight increased for the fourth consecutive month to 8.4% in August, a 71-month high. The allocation rose 30 basis points MoM and 80 basis points YoY.

The sector was also among those where mutual fund ownership was significantly higher than its BSE 200 weight, with 14 funds over-owned relative to the benchmark.

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2. Capital Goods

Capital Goods was another clear favourite. Its portfolio weight rose to 7.9%, up 30bp MoM and 80bp YoY. The sector was over-owned by nine funds compared with the BSE 200.

3. E-commerce

Mutual funds are also increasing exposure to newer-age businesses. E-commerce allocation climbed to an all-time high of 3.3%, rising for the fourth consecutive month. Its weight was up 20bp MoM and 70bp YoY.

4. Insurance

Insurance was among the sectors that saw an increase in mutual fund allocation in August. The report identifies Insurance, Healthcare and Capital Goods as the sectors showing the most notable month-on-month increases in portfolio weights.

5. NBFC–Non-Lending

Mutual funds also increased exposure to NBFC–Non-Lending. The sector was over-owned relative to the BSE 200 by 16 funds, the highest among the sectors highlighted by the report.

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What does the shift mean?

The portfolio changes point to a broader rotation rather than a simple exit from equities. In August, mutual funds increased weights in Insurance, Healthcare, Capital Goods, Metals, E-Commerce, NBFC–Non-Lending, PSU Banks, Retail and Real Estate, while reducing exposure to Consumer, NBFC–Lending, Utilities, Private Banks, Oil & Gas, Telecom, Cement, Chemicals and Logistics.

This could indicate that fund managers are positioning portfolios towards sectors they expect to benefit from structural growth and improving earnings visibility over the medium term.

The shift came even as equity mutual fund net inflows strengthened to ₹31,700 crore in August from ₹26,200 crore in July, helped by lower redemptions.

For investors, the key takeaway is that mutual fund managers are not turning away from equities; they are changing where within equities they see opportunities.

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