Top Thematic Mutual Funds in India

Thematic mutual funds in India are gradually gaining popularity among investors. These funds are not focused on a single sector, but rather on broader economic and social themes such as Digital India, green energy, infrastructure, and healthcare. Such funds are attractive to those who want to capture the growth of a strong theme over the long term. In this blog, we'll explore why thematic mutual funds in India are becoming increasingly popular and which are the best thematic mutual funds in India to consider.

What are Thematic Mutual Funds?

Thematic mutual funds are equity funds that invest in companies based on a broad economic or social theme, such as Digital India, Green Energy, Infrastructure, Healthcare, or Consumption. These funds aim to capture the long-term growth of that specific theme.

Types of Thematic Funds

Sector-Based Themes : 

Where investments are made in multiple sectors related to a broad theme, such as the Digital India theme, which may include IT, telecom, and fintech.

Trend-Based Themes : 

Funds that focus on a specific trend, such as Green Energy or ESG (Environmental, Social, Governance).

Demographic Themes : 

Such as Consumption or Healthcare, which are based on population and consumption trends.

How Do Thematic Funds Work?

Investments in these funds are invested in stocks of companies associated with the chosen theme. For example, if the fund is based on the theme "Green Energy," it will invest in companies involved in solar energy, wind energy, or electric vehicles. Thus, investor returns are directly dependent on the growth and performance of that theme.

Best thematic mutual funds in India

1. ICICI Prudential Technology Fund : ICICI Prudential Technology Fund primarily invests in companies in the technology sector and aims to provide investors with long-term exposure to this sector's growth. The fund's holdings include top companies such as Infosys Ltd. (20.94%), Tata Consultancy Services Ltd. (8.25%), Bharti Airtel Ltd. (6.88% + 6.77%), Tech Mahindra Ltd. (5.62%), LTIMindtree Ltd. (4.58%), Wipro Ltd. (4.28%), HCL Technologies Ltd. (3.95%), Mphasis Ltd. (3.80%), and Eternal Ltd. (2.64%). The fund's performance indicators are Alpha 0.23%, Beta 1.04, and Sharpe Ratio 0.178. It has a Fund Rating of 3*. This fund is suitable for investors who want to participate in the long-term growth of the technology sector and are willing to take a moderate amount of risk. The fund w as incepted on June 22, 1993 and currently has a total AUM of ?908.28 crore.

Key Matrix

2. Tata Digital India Fund: Tata Digital India Fund primarily invests in companies in the digital and technology sector and aims to provide investors with exposure to the sector's long-term growth. The fund's holdings include leading companies such as Infosys Ltd. (18.69%), Tata Consultancy Services Ltd. (12.05%), Tech Mahindra Ltd. (9.19%), Wipro Ltd. (7.10%), Eternal Ltd. (7.08%), and HCL Technologies Ltd. (6.29%). The fund's performance is balanced, with an Alpha of 0.29%, a Beta of 0.85, and a Sharpe Ratio of 0.165. The fund was incepted on March 15, 1994, and currently has a total AUM of ?188.19 crore. This fund is suitable for investors who wish to participate in the long-term growth of the digital and technology sector and are willing to tolerate risk.

Key Matrix

3. SBI Consumption Opportunities Fund : SBI Consumption Opportunities Fund primarily invests in companies in the consumer and consumption sector. Its objective is to provide investors with exposure to the long-term growth of this sector. The fund's holdings include leading companies such as Bharti Airtel Ltd. (5.89%), Jubilant FoodWorks Ltd. (4.72%), Britannia Industries Ltd. (4.48%), Hindustan Unilever Ltd. (4.19%), Asian Paints Ltd. (4.04%), and Mahindra & Mahindra Ltd. (3.98%). The fund's performance is balanced, with an Alpha of 0.06%, a Beta of 0.86, and a Sharpe Ratio of 0.228. The fund was incepted on February 7, 1992, and currently has a total AUM of ?1,116.71 crore. This fund is suitable for investors who wish to participate in the long-term growth of the consumer sector and are willing to tolerate risk.

Key Matrix

4. Nippon India Consumption Fund : Nippon India Consumption Fund primarily invests in companies in the consumer and consumption sector. Its objective is to provide investors with exposure to the long-term growth of this sector. The fund's holdings include leading companies such as Mahindra & Mahindra Ltd. (8.36%), ITC Ltd. (7.56%), Hindustan Unilever Ltd. (7.05%), Bharti Airtel Ltd. (5.93%), Avenue Supermarts Ltd. (4.57%), Eternal Ltd. (4.13%), Interglobe Aviation Ltd. (3.45%), Asian Paints Ltd. (3.40%), Godrej Consumer Products Ltd. (3.00%), and Eicher Motors Ltd. (2.88%). The fund's performance is balanced, with an Alpha of 0.06%, a Beta of 0.90, and a Sharpe Ratio of 0.245. The fund was incepted on February 24, 1995, and currently has a total AUM of ?573.67 crore. This fund is suitable for investors who want to participate in the long-term growth of the consumer sector and have a moderate risk appetite.

Key Matrix

5. Mirae Asset Great Consumer Fund : Mirae Asset Great Consumer Fund primarily invests in companies in the consumer and consumption sector. Its objective is to provide investors with long-term growth in this sector. The fund's holdings include leading companies such as ITC Ltd. (7.76%), Mahindra & Mahindra Ltd. (6.93%), Maruti Suzuki India Ltd. (6.90%), Bharti Airtel Ltd. (6.69%), Eternal Ltd. (6.21%), Trent Ltd. (3.94%), Avenue Supermarts Ltd. (3.87%), Eicher Motors Ltd. (3.46%), Hindustan Unilever Ltd. (3.14%), and Asian Paints Ltd. (2.88%).

The fund's performance is balanced, with an Alpha of 0.08%, a Beta of 0.98, and a Sharpe Ratio of 0.251. The fund was incepted on November 20, 2006, and currently has a total AUM of ?198.34 crore. This fund is suitable for investors who want to participate in the long-term growth of the consumer sector and are willing to take moderate risk.

Key Matrix

6. SBI ESG Exclusionary Strategy Fund : The SBI ESG Exclusionary Strategy Fund primarily invests in companies that adhere to ESG (Environmental, Social, Governance) standards. Its objective is to provide investors with sustainable and responsible investment opportunities. The fund's holdings include leading companies such as HDFC Bank Ltd. (9.40%), ICICI Bank Ltd. (8.19%), Infosys Ltd. (5.01%), Larsen & Toubro Ltd. (4.70%), Maruti Suzuki India Ltd. (4.30%), Axis Bank Ltd. (4.27%), Ultratech Cement Ltd. (3.95%), Kotak Mahindra Bank Ltd. (3.61%), State Bank of India (3.48%), and Reliance Industries Ltd. (3.43%). The fund's performance is balanced, with an Alpha of 0.02%, a Beta of 0.89, and a Sharpe Ratio of 0.184. The fund was incepted on February 7, 1992, and currently has a total AUM of ?1116.71 crore. This fund is suitable for investors who want to participate in the long-term growth of ESG and responsible investing.

Key Matrix

7. ICICI Prudential Commodities Fund : ICICI Prudential Commodities Fund primarily invests in companies in the commodity and metal sectors. Its objective is to provide investors with exposure to the long-term growth of this sector. The fund's holdings include leading companies such as Jindal Steel Ltd. (8.51%), JSW Steel Ltd. (7.68%), Jindal Stainless Ltd. (7.63%), Ambuja Cements Ltd. (7.13%), Ultratech Cement Ltd. (6.35%), and Vedanta Ltd. (5.38%). The fund's performance is balanced, with an Alpha of 0.38%, Beta of 0.88, and Sharpe Ratio of 0.253. The fund was incepted on June 22, 1993, and currently has a total AUM of ?908.28 crore. This fund is suitable for investors who wish to participate in the long-term growth of the commodity and metal sectors and have a moderate risk tolerance.

Key Matrix

8. HDFC Housing Opportunities Fund : HDFC Housing Opportunities Fund primarily invests in companies in the housing and infrastructure sectors. Its objective is to provide investors with exposure to the long-term growth of this sector. The fund's holdings include leading companies such as HDFC Bank Ltd. (9.77%), ICICI Bank Ltd. (8.70%), Larsen & Toubro Ltd. (8.12%), Ambuja Cements Ltd. (7.01%), NTPC Ltd. (6.12%), State Bank of India (5.62%), Kalpataru Projects International Ltd. (4.86%), Prestige Estates Projects Ltd. (4.62%), Ultratech Cement Ltd. (4.43%), and Tata Steel Ltd. (4.26%). The fund's performance is balanced, with an Alpha of 0.49%, a Beta of 0.95, and a Sharpe Ratio of 0.237. The fund was incepted on December 10, 1999, and currently has a total AUM of ?793.71 crore. This fund is suitable for investors who want to participate in long-term growth in the housing and infrastructure sectors.

Key Matrix

9. UTI-Transportation and Logistics Fund : UTI-Transportation and Logistics Fund primarily invests in companies in the transportation and logistics sector. Its objective is to provide investors with exposure to the long-term growth of this sector. The fund's holdings include leading companies such as Mahindra & Mahindra Ltd. (13.48%), Maruti Suzuki India Ltd. (10.44%), Eicher Motors Ltd. (9.54%), Eternal Ltd. (6.78%), Interglobe Aviation Ltd. (5.86%), and Bajaj Auto Ltd. (5.53%). The fund's performance is balanced, with an Alpha of -0.19%, a Beta of 0.93, and a Sharpe Ratio of 0.304. The fund was incepted on November 14, 2002, and currently has a total AUM of ?352.59 crore. This fund is suitable for investors who want to participate in the long-term growth of the transportation and logistics sector and are willing to take moderate risk.

Key Matrix

10. Sundaram Services Fund : Sundaram Services Fund primarily invests in service sector and financial companies. Its objective is to provide investors with the benefits of long-term growth in these sectors. The fund's holdings include leading companies such as Bharti Airtel Ltd. (7.90%), HDFC Bank Ltd. (7.11%), Reliance Industries Ltd. (4.80%), Eternal Ltd. (4.75%), Axis Bank Ltd. (4.04%), and Tri-Party Repo (TREPS) (3.83%). The fund's performance is balanced, with an Alpha of 0.52%, a Beta of 0.89, and a Sharpe Ratio of 0.259. The fund was incepted on February 26, 1996, and currently has a total AUM of ?68.69 crore. This fund is suitable for investors who want to participate in the long-term growth of the service sector and financial companies.

Key Matrix

Why 2025 is Crucial for Thematic Mutual Funds in India

Strong Economic Growth Environment : 

India's economy is expected to grow at around 6.5% in FY26, supported by strong domestic demand, public investment, and the services sector. This steady growth provides promising opportunities for thematic themes (such as infrastructure, consumption, and digital), as these themes are often directly impacted by economic growth.

Strong Emphasis on Capex and Infrastructure : 

The government has significantly increased capital expenditure through the budget and various policies. For example, the budget has increased infrastructure spending. Investment trends in sectors such as electronics, transport, logistics, and digital infrastructure have increased, creating opportunities for thematic funds.

Consumption Boost and Tax Reforms : 

Improved middle-class incomes, tax concessions, and reforms like GST are easing pressure on prices of products and services, positively impacting consumption. The rise in consumer spending presents an opportunity for consumption-themed funds as purchasing power and domestic demand will increase.

Investor Participation and Growth of the MF Industry :

The total AUM of the mutual fund industry has increased to approximately ?72 lakh crore, indicating that investors are returning to equities and mutual funds. SIP (Systematic Investment Plan) investments are consistently high, increasing the acceptance of thematic options among regular investors.

Top Investment Themes to Watch in 2025

Consumption & Bharat Story : 

India is seeing strong consumer spending at both rural and urban levels. Private final consumption expenditure (PFP) recently grew by 6%, providing a stable base for the economy. This theme benefits funds that invest in FMCG, consumer electronics, retail, and everyday consumer goods companies.

Technology & Digital India : 

Digital India has found a new accelerator. 5G expansion, cloud services, fintech expansion, and growing demand for artificial intelligence are driving these sectors forward. Investments under this theme focus on stocks that provide software, internet platforms, data analytics, and digital infrastructure services.

Infrastructure & Capex : 

The government has targeted approximately US$1.4 trillion in investment by 2025 through the National Infrastructure Pipeline (NIP). This fund benefits companies that operate in sectors such as roads, bridges, railways, urban development, and construction materials.

Green Energy & ESG : 

Green energy and environmentally sustainable (ESG) investments are becoming a top priority for investors today. India has adopted a target of 500 GW of non-fossil fuel capacity, and investments in renewable energy have increased. This theme includes technology companies such as solar, wind, battery storage, and green hydrogen.

Healthcare & Pharma : 

India's healthcare and pharmaceutical industries are growing rapidly. Healthtech, biotech, and pharmaceutical services companies have seen significant opportunities. This theme is for funds that invest in pharmaceuticals, gene technology, medical devices, and healthcare service providers.

Niche Themes (Payments, Semiconductor, Defense, etc.) : 

Some themes are very specific, such as digital payments, semiconductor manufacturing, and defense and security technology. These funds select companies that show strong potential in their niche sector, and if that sector thrives, their returns can be very strong.

How to Select the Right Thematic Fund

When investing in thematic mutual funds, it's important to consider a few important aspects. Understanding the points below can help you better inform your investment decisions.

Theme Longevity : 

The performance of thematic funds depends on the long-term relevance of the particular theme. For example, themes like "Green Energy" or "Digital India" are likely to remain relevant in the future. Therefore, investing in such themes may be prudent.

Fund Manager Track Record : 

The fund manager's experience and prior performance are important. For example, HDFC Defense Fund delivered a 77% return last year, reflecting the manager's strategic understanding.

Portfolio Concentration : 

Investments in thematic funds are concentrated in a specific sector or theme, which can increase risk. For example, SBI Energy Fund delivered a -9.13% return last year, reflecting fluctuations in the energy sector.

AUM & Liquidity : 

A fund's assets under management (AUM) and liquidity ensure that the fund has sufficient investments and that emergency withdrawals are possible. 

Expense Ratio & Tax Implications : 

A fund's expense ratio and tax policy impact your returns. Funds with lower expense ratios may be more profitable. Additionally, ELSS funds can be considered for tax benefits.

Historical Returns & Drawdowns : 

It is important to understand a fund's past performance. For example, HDFC Transportation and Logistics Fund has returned over 30% over the past three years. However, drawdowns (maximum loss limit) should also be considered.

Benchmark Comparison : 

Compare the fund's performance to its respective benchmark. If the fund consistently outperforms its benchmark, this is a positive sign.

Risks & Common Mistakes to Avoid

Chasing Short-Term Returns : 

Thematic mutual funds are created for the long term. Seeking quick returns can be detrimental to your investment.

Over-concentration in One Sector/Theme : 

Investing too much in a single sector or theme can increase portfolio risk. Diversification is essential.

Ignoring Portfolio Rebalancing : 

Failing to review and rebalance your portfolio periodically can impact returns.

Neglecting Theme Performance Review : 

Failing to regularly monitor your theme's performance hinders the ability to accurately assess opportunities and risks.

Emotional Investing : 

Investing based on emotions during market fluctuations can be detrimental. Make decisions based on planning and research.

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Conclusion

Thematic mutual funds in India offer excellent opportunities for investors who want to capitalize on long-term growth in a specific sector or theme. When invested with proper research and understanding, these funds can provide good portfolio diversification and superior returns. Investors should not be afraid of short-term fluctuations and should make disciplined investments according to their strategy.

FAQs

Q1. What are thematic mutual funds?

Thematic mutual funds are funds that invest in a specific sector or theme, such as technology, consumption, or housing.

Q2. Are thematic funds risky?

Yes, because they focus on a single sector or theme, they are more vulnerable to market fluctuations.

Q3. How long should I invest in thematic funds?

Thematic funds are best for long-term investments, typically 5 years or more.

Q4. Can I invest through SIPs?

Yes, you can invest gradually through SIPs and manage risk.

Q5. Where can I invest in thematic funds easily?

You can easily invest in thematic funds with zero charges on trusted platforms like Rupeezy.