Mutual Funds · Concentrated bet
Sectoral & Thematic Funds
Sectoral funds invest 80%+ in ONE sector (banking, pharma, IT, FMCG, infrastructure, etc.). Thematic funds invest in a broader theme (ESG, manufacturing, consumption, digital). Highest reward + highest volatility category. NOT a starter fund — only for investors who already have diversified core + understand sector rotation. SEBI mandates these be marked 'very high' risk.
Who needs this
Tactical investors with strong sector view + 5+ yr horizon. Already have 70%+ portfolio in diversified equity. Comfortable with 30-40% drawdowns when sector goes out of favour. NEVER as a primary equity holding.
Category at a glance
Min sector allocation
80%
SEBI sectoral
Typical 3-yr CAGR (top sector)
20-30%
Wide range
Worst-case drawdown
30-50%
Sector rotation
Volatility (std dev)
20-30%
Highest in equity MF
Expense ratio (direct)
0.6-1.5%
Active premium
Tax (LTCG)
12.5%
Above ₹1.25L/yr
Top 5 sectoral & thematic funds
Source: AMFI + AMC factsheets · refreshed quarterly
| Fund | AMC | Expense % | 3y CAGR |
|---|---|---|---|
| ICICI Pru Banking & Financial Services | ICICI Pru | 0.94% | 21.5% |
| Nippon India Pharma | Nippon | 1.01% | 22.3% |
| SBI Technology Opportunities | SBI | 0.81% | 19.8% |
| ICICI Pru FMCG | ICICI Pru | 1.02% | 16.4% |
| Quant Infrastructure Fund | Quant | 0.88% | 28.7% |
Key decisions
- Q1
Which sector / theme to pick?
Banking: cyclical, hits highs in rate-cut cycles. IT: USD-revenue beneficiary, sensitive to global tech demand. Pharma: defensive, US-FDA + India-pricing-policy risks. Manufacturing: long-term play (PLI scheme). Pick based on conviction + valuation, not past returns.
- Q2
How much portfolio share?
Maximum 10-15% of equity portfolio. ANY single sectoral fund above 15% creates concentration risk. Better to own 2-3 sector funds than one big position.
- Q3
When to exit?
On thesis change (sector loses tailwind), valuation extreme (P/E far above historical band), or after 3-5x return. Sectoral funds aren't 'forever' holdings — rotate.
SEBI rules + scheme specifics
- Sectoral: 80%+ in a single sector. Thematic: 80%+ in a defined theme.
- Marked 'very high' risk on the SEBI riskometer.
- Concentration risk significantly higher than diversified equity funds.
- LTCG: 12.5% on gains > ₹1.25L/year (held ≥ 12 months).
Calculators + tools
All mutual funds
Recommended →Free MF Overlap Analyzer — see if your funds duplicate