Why You’re Seeing a Surge in Thematic Investing
You’re not alone if you’re looking beyond traditional mutual funds. The sectoral and thematic funds category has become a magnet for Indian investors like you, thanks to:
1. Focused Growth: The ability to capture gains from booming sectors.
2. Theme-Based Narrative: Investing in ideas like AI, clean energy, or pharma adds personal conviction.
3. Managed Risk: Even though focused, thematic funds offer some inbuilt diversification.
What Are Sectoral and Thematic Funds?
Sectoral Funds
These invest only in one specific industry—like banking, IT, or pharma. The entire portfolio sticks to that space, so if the sector flies, you fly with it.
Thematic Funds
These combine companies across industries under a common theme—say “EV revolution,” which may include automakers, battery tech firms, and charging infra.
The Numbers That Prove the Boom
Here’s how much this space has exploded in just a year:
- AUM Growth: From ₹2.58 lakh crore in 2023 to ₹4.61 lakh crore in 2024
- Retail Investors: Jumped 45%, showing your growing comfort with niche investing
- New Launches: Thematic schemes increased from 85 to 130
- Source: AMFI
Hottest Themes You Should Know
1. Technology & Digital Innovation
- AI and machine learning
- Cloud computing
- Cybersecurity
- FinTech and UPI adoption
✅ If you’re bullish on India’s digital transformation, this theme is for you.
2. Healthcare & Pharma
From vaccines to wearable health tech, pharma funds gained ~32% AUM growth.
- Includes diagnostics, generics, hospitals, and biotech.
- A semi-defensive theme—suitable if you’re cautious but growth-hungry.
3. Infrastructure & Renewables
Driven by ₹100 lakh crore in planned infra spending, these funds gained ~28%.
- Includes roads, power, solar, and EV infra.
- If you’re a long-term investor betting on India’s real economy, this is your pick.
How You Can Start Investing in Sectoral and Thematic Funds
1. Evaluate Your Investment Horizon
Minimum 5–7 Years Needed
These themes don’t play out overnight. You’ll need patience and conviction to ride the volatility.
2. Limit Allocation to 10–15%
Don’t overcommit. Let’s say your equity corpus is ₹10 lakh—invest ₹1–1.5 lakh in thematic funds.
3. SIP Is Your Best Friend
Systematic plans reduce timing risks and let you average out costs. Plus, they keep your discipline intact.
👉 Internal Link: Best Mutual Funds to Invest in for the Next Decade (2025–2035)
Learn from the Experts
Video 1 – Understanding Thematic Funds
Video 2 – How to Build a Thematic Portfolio
Know the Risks Before You Jump In
1. Higher Volatility
One bad quarter for the theme = sharp drawdown. You must have the stomach for it.
2. Regulatory Surprises
A government clampdown or policy change can disrupt even strong themes.
3. Exit Load & Liquidity Issues
Smaller sectoral funds may carry exit loads or lack active volumes.
👉 External Link: Learn more about mutual fund regulations on SEBI’s official website
Real Example: ₹1 Lakh in Technology Funds Over 4 Years
📊 SIP-Based Growth Chart
| Year | Invested | NAV Start | NAV End | Year-End Value |
|---|---|---|---|---|
| 2020 | ₹12,000 | 15 | 45 | ₹36,000 |
| 2021 | ₹12,000 | 18 | 54 | ₹36,000 |
| 2022 | ₹12,000 | 24 | 48 | ₹24,000 |
| 2023 | ₹12,000 | 20 | 60 | ₹36,000 |
| Total | ₹60,000 | — | — | ₹1,32,000 |
This shows how sectoral and thematic funds can double your investment—but with bumps along the way.
Pro Tips to Manage Thematic Exposure
Blend with Diversified Equity Funds
Don’t put all eggs in one theme. Balance it with large-cap and hybrid funds.
Rebalance Every 6–12 Months
Track fund performance and switch if themes underperform consistently.
Use Market Corrections as Entry Points
Buy more when markets overreact—that’s when the real opportunity lies.
👉 Internal Link: Here’s how to use SIPs smartly to build wealth
What’s Coming Next in Thematic Investing?
Analysts project more niche categories emerging:
- Space Tech & Satellites
- Agriculture Tech
- Women-led Enterprises
- Global AI Exposure
If you stay alert and updated, you’ll be ahead of the curve in finding the next ₹1 lakh crore opportunity.
Resources for You
CRISIL Reports on Sectoral Funds
Morningstar Thematic Fund Ratings
📘 Frequently Asked Questions (FAQs) About Sectoral and Thematic Funds
| # | Question & Answer |
|---|---|
| 1 | Are sectoral and thematic funds good for first-time investors like me? If you’re just starting, it’s better to begin with diversified mutual funds. Sectoral and thematic funds are more volatile and suited for experienced investors who can handle short-term fluctuations. |
| 2 | How much of my mutual fund portfolio should be in thematic funds? Limit your exposure to 10–15% of your total equity portfolio. For example, if you’ve invested ₹5 lakh, keep ₹50,000–₹75,000 in thematic funds. |
| 3 | Can I invest in thematic funds through SIP? Yes! SIPs are ideal for sectoral and thematic funds. They help average out your purchase cost and encourage disciplined investing. |
| 4 | What’s the difference between a sectoral fund and a thematic fund?
|
| 5 | Are sectoral funds actively managed? Yes, most are actively managed with a higher expense ratio (typically 1.5%–2.5%). Fund managers dynamically allocate stocks within the chosen sector or theme. |
| 6 | What are some risks I should prepare for?
Only invest if you have a long-term horizon and appetite for risk. |
| 7 | Can I exit anytime, or are there lock-in periods? No lock-ins. However, exit loads (1% within 1 year) and capital gains tax apply. Long-term gains above ₹1 lakh are taxed at 10%. |
| 8 | How do I track performance? Use apps like Groww, Zerodha Coin, or sites like Morningstar and Value Research Online. Track 3- and 5-year rolling returns instead of just 1-year. |
| 9 | Are there index-based thematic funds too? Yes, there are ETFs and index funds tracking themes like Nifty Infrastructure, Nifty Consumption, etc. They’re passively managed and cost-efficient. |
| 10 | Is it better to pick a theme I understand? Absolutely! If you’re in IT or healthcare, investing in those themes makes sense. Your understanding gives you an edge and keeps you confident during market volatility. |
Final Thoughts
Sectoral and thematic funds are no longer exotic tools. They’ve become strategic assets in your portfolio—if used wisely. Whether you’re drawn to healthcare, tech, or infrastructure, make sure your choices reflect your goals and risk appetite.
If you’re ready to align your money with megatrends, now’s the time to get started.