List of Best Sectoral Mutual Funds in India 2025

Many investors look for ways to diversify their portfolios when investing in mutual funds. One method is investing in asset classes such as equity, debt, real estate, and hybrid funds. Another common strategy is investing in different economic sectors through sectoral mutual funds.

Sectoral mutual funds are open-ended equity schemes focused on sectors like energy, infrastructure, healthcare, and utilities. They invest in companies that have various market capitalisations within a particular sector. These funds can offer significant returns when the sector performs well, allowing investors to leverage their market knowledge for potential profits. This article will explore a list of the top sectoral funds across different sectors and themes. This article has comprehensively listed top sectoral funds spanning across different sectors, based on their 5Y CAGR.

List of Best Sectoral Mutual Funds in India (2025)

Here is a list of the top sectoral mutual funds based on their 5Y CAGR:

Fund Name	Sub Category	AUM (Cr.)	CAGR 3Y (%)	Expense Ratio (%)	CAGR 5Y (%)
Quant Infrastructure Fund	Sectoral Fund - Infrastructure	3,172.91	25.58	0.73	42.56
ICICI Pru Infrastructure Fund	Sectoral Fund - Infrastructure	7,415.53	33.43	1.15	40.26
Bandhan Infrastructure Fund	Sectoral Fund - Infrastructure	1,577.17	32.40	0.88	38.12
HDFC Infrastructure Fund	Sectoral Fund - Infrastructure	2,392.50	35.66	1.01	37.61
Franklin Build India Fund	Sectoral Fund - Infrastructure	2,725.60	34.00	0.95	36.88
Nippon India Power & Infra Fund	Sectoral Fund - Energy & Power	7,026.26	34.06	0.96	36.70
DSP India T.I.G.E.R Fund	Sectoral Fund - Infrastructure	4,950.08	30.75	0.88	36.24
Canara Rob Infrastructure Fund	Sectoral Fund - Infrastructure	836.75	31.85	1.07	35.13
Kotak Infra & Eco Reform Fund	Sectoral Fund - Infrastructure	2,180.72	27.92	0.71	34.77
LIC MF Infra Fund	Sectoral Fund - Infrastructure	886.70	31.68	0.58	34.38

Disclaimer: Please note that the above table is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing. The data is derived from Tickertape Stock Screener and is subject to real-time updates.

Note: The data on the list of the best thematic mutual funds is from 14th May 2025. This data is derived from Tickertape Stock Screener using the following filters:

• Plan: Growth
• Category: Sectoral Funds (Infrastructure, Pharma & Healthcare, Consumption, Service Industry, Technology, Banks and Financial Services, Energy & Power, and Auto) 
• 5Y CAGR: Sorted from Highest to Lowest

🚀 Pro Tip: You can use Tickertape’s Stock Screener to research and evaluate stocks with over 200+ filters and parameters.

Overview of the Top Sectoral Mutual Funds

Quant Infrastructure Fund

This fund aims to generate capital appreciation and long-term growth by investing in companies aligned with the infrastructure theme. It focuses on businesses that are either directly involved in infrastructure development or poised to benefit from the sector’s expansion. The fund takes a high-conviction, active approach to identifying emerging opportunities within the infrastructure ecosystem.

ICICI Prudential Infrastructure Fund

With a dual focus on capital appreciation and income distribution, this fund predominantly invests in equity and equity-related instruments of companies operating in the infrastructure space. It seeks to capture value across core infrastructure sectors such as power, transportation, energy, and construction.

Bandhan Infrastructure Fund

This scheme looks to deliver long-term capital growth by maintaining an actively managed and diversified portfolio. It invests primarily in equity and equity-related securities of companies that are either driving or benefiting from infrastructure development across India, reflecting a broad-based participation in infrastructural growth.

HDFC Infrastructure Fund

Targeted at long-term capital appreciation, this fund invests mainly in companies engaged in or set to benefit from infrastructure development. Among the top-performing sectoral funds, its portfolio includes equity and related instruments of firms spanning sectors such as roads, ports, energy, telecom, and urban infrastructure.

Franklin Build India Fund

Designed to achieve capital appreciation, this fund focuses on companies that are either directly or indirectly involved in infrastructure-related activities. It takes a flexible approach, investing across market capitalisations and sectors that contribute to or support India’s infrastructure growth.

How to Invest in Sectoral Mutual Funds?

You can easily invest in sectoral mutual funds by following these steps:

• To invest in mutual funds, you can visit an equity investment platform such as smallcase or Tickertape.
• The next step would be to research and identify the best sectoral funds to invest in which aligns with your investment thesis. You can easily select and learn more about the best sectoral funds with the help of a financial tool like the Tickertape Mutual Fund Screener. With 50+ pre-loaded filters, it helps you to create a comprehensive list by giving insights about the fund’s performance. 
• Once you have selected the funds based on different metrics and parameters, go to smallcase.com or the smallcase app, and login via your phone number. Click on ‘Discover‘ and enter the name of the specific mutual fund name in the search bar and hit enter. You can click on ‘invest now’ and select whether you want to invest a lump sum amount or start a SIP and start investing!

What are Sectoral Funds?

Sectoral mutual funds are equity schemes that focus on specific sectors of the economy, like utilities, energy, technology, healthcare and infrastructure. They invest in companies’ stocks within these sectors, spanning different market capitalisations and security types. These funds enable investors to benefit from the top-performing stocks in chosen sectors. 

By investing in businesses within the same industry, sectoral equity funds provide exposure to specific segments of the economy. For example, sectors in India include technology, banking, pharma, auto, healthcare and natural resources, each with the potential for medium to long-term growth and profitability. Investors can leverage sectoral mutual funds to capitalise on growth opportunities within these sectors.

How Do Sectoral Funds Work?

The Indian mutual fund economy is a culmination of many sectors, spanning IT sector mutual funds, banking sector mutual funds, pharma sector mutual funds, chemical sector mutual funds, auto sector mutual funds and natural resources funds. Certain sectors can exhibit remarkable performance over the medium to long term. Sectoral funds are strategically crafted to empower investors to seize these opportunities by zeroing in on specific sectors.

Sectors are clusters of businesses offering akin products or services. For instance, a pharma sectoral fund entails investments not only in pharmaceutical manufacturers, like Cipla, but also in healthcare facilities and diagnostics, broadening its scope. These funds diversify across the spectrum of company sizes, encompassing large-cap, mid-cap, and small-cap, as long as they fall within the designated sector. SEBI stipulates that a minimum of 80% of a sectoral fund’s total assets must be allocated to equity and equity-related instruments within the specified sector.

Types of Sectoral Mutual Funds

Here are the various types of sector-specific mutual funds available in India:

1. Utility Funds: These thematic investment funds are focused on companies in the utility sector, these funds aim to offer stable dividends.
2. Natural Resources Funds: These funds invest in industries such as oil, natural gas, energy, forestry, and timber and target growth within natural resources.
3. Technology Funds: These IT funds provide exposure to the technology sector and cater to investors interested in technological innovations. These technology opportunities funds invest in technology stocks in the market. 
4. Financial Funds: These funds primarily invest in companies from the financial industry, including banking, insurance, and accounting firms.
5. Communications Funds: These funds invest in the telecommunications sector and internet-related companies, aligning with the evolving communication industry.
6. Healthcare Funds: These funds cover pharmaceutical companies, for-profit medical institutions, and biotechnology firms, supporting advancements in healthcare.
7. Precious Metals Funds: These metal mutual funds offer exposure to precious metals like gold, platinum, silver, copper, and palladium and cater to investors interested in the precious metals market.
8. Real Estate Funds: These funds enable small investors to participate in the real estate market, providing income and growth opportunities.

Note: These are just some of the sectors involved in the categorisation of sectoral mutual funds and there may be more. 

Features of Sectoral Mutual Funds 

The following are a few key features of sectoral equity mutual funds:

• Sector-Focused Investment: Sectoral funds are specialised mutual funds that concentrate on specific sectors of the economy. These funds categorise investments based on industry sectors, such as technology, healthcare, or energy. 
• High Potential Returns: These funds typically allocate a substantial portion—around 80%—of their assets into equity instruments, as mandated by SEBI regulations. Investors can benefit from the growth of sectors that outperform the broader market. 
• Elevated Risk Profile: Sectoral equity funds are among the riskiest mutual fund investments. First, as equity funds, they are susceptible to market fluctuations and volatility. Second, their focus on a single sector reduces diversification, making them vulnerable to concentration risks.
• Higher Cost Structure: This higher cost is attributed to the specialised nature of these funds, which require in-depth sector-specific research and management expertise. The expenses associated with managing and monitoring investments in a single sector are passed on to investors through higher expense ratios and fees.
• Performance Variability: Sectoral fund performance can vary significantly based on economic cycles, sector-specific events, and market conditions. 

Who Should Invest in Sectoral Mutual Funds?

Sectoral funds, including the best thematic funds, can offer potential rewards for savvy investors, but they come with high risk due to limited diversification. Before diving in, assess your financial goals, risk tolerance, and investment horizon. They can be ideal for:

• Active and informed investors who stay updated with market news and can anticipate sector performance over the medium to long term.
• Investors with a high-risk appetite are comfortable with the concentrated risk of sector-specific investments.
• Investors interested in tactical allocation aim to capitalise on sector cycles by strategically entering during downturns and exiting during upswings.

Benefits of Investing in Sectoral Mutual Funds

Here are a few potential benefits of investing in sectoral mutual funds:

• Focused Exposure and Potential High Returns: Unlike diversified funds that spread investments across multiple industries, sectoral funds concentrate on a single sector. This focused approach may allow investors to capitalise on the growth potential of that sector potentially. 
• Strategic Diversification within Sectors: While sectoral funds do not provide diversification across industries, they diversify within the chosen sector by investing in companies across various market capitalisations. This strategy may help mitigate risks associated with individual stock performance within the sector. 
• Professional Management and Expertise: Sectoral funds are managed by professional fund managers who specialise in specific sectors. This professional management can be advantageous for investors who lack the expertise or time to select individual stocks within a sector. 
• Long-Term Investment Potential: Long-term sectoral fund investments can align with long-term financial goals, such as retirement planning, by focusing on sectors expected to perform well over an extended period. Investors can potentially achieve inflation-beating returns by carefully selecting sectors with strong growth prospects through thorough analysis and research. 

Risks Involved While Investing in Sectoral Mutual Funds

Sectoral funds primarily invest in equity instruments, posing specific risks:

• Concentration Risk: The best sector mutual funds are heavily invested in one sector, making them highly concentrated and the riskiest type of mutual fund.
• Liquidity Risk: Fund managers may struggle to sell securities during market downturns, potentially leading to losses.
• Volatility Risk: Fluctuations in the sector directly impact fund performance, potentially amplifying returns or losses based on sector performance.
• Cyclical Nature: Thematic funds India are vulnerable to economic cycles affecting specific industries, influencing fund performance accordingly.
• Limited Diversification: Focusing on a single industry limits diversification, potentially increasing losses during economic shifts impacting that sector.

How to Choose the Best Sectoral Mutual Funds for Investing?

When selecting sectoral mutual funds, including the best manufacturing mutual funds, for your investment portfolio, active consideration of key factors is paramount. 

• Determining Financial Objectives: Investors can begin this journey of choosing sectoral thematic mutual funds by identifying their financial objectives and risk tolerance. This would help them sort out which sectors interest them in terms of their theme and risk factors. 
• Assessing Performance History: Investors can assess the performance history of sectoral funds within their preferred industry by focusing on the consistency and growth potential of thematic funds. 
• Conducting In-depth Research into the Sectors: Conducting in-depth research into the specific sectors you are interested in can prove to be helpful as well. 
• Analysing Market Conditions: Investors can analyse market conditions, regulatory environments, and global trends influencing those sectors. This can help in getting a more wholesome understanding of the potential pitfalls and market downturns, especially in terms of the sector that interests you. 
• Professional Management: Investors can look for mutual funds sector wise managed by experienced professionals with a track record of navigating the nuances of specialised markets. 
• Diversifying Investment Portfolio: Diversification remains crucial even within sectoral investments. Investors can opt for funds that spread assets across various companies within the chosen sector to potentially mitigate risk factors. 

Taxation on Sectoral Mutual Funds as per the Union Budget 2024-25

Sectoral mutual funds are taxed according to their asset allocation and holding period. Being aware of these tax implications is essential for making informed financial decisions. The Union Budget for 2024-25 has made significant changes to the taxation on equity mutual funds. Here we have listed these changes, along with the revised tax rates for equity mutual funds:

• Tax-Free Limit: The capital gains up to Rs. 1.25 lakh per year are tax-free. This is an increase from the previous limit of Rs. 1 lakh.
• Tax Rate: The gains exceeding Rs. 1.25 lakh are now taxed at a flat rate of 12.5%. This is an increase from the previous rate of 10%.
• Indexation: The benefit of indexation, which allowed investors to adjust the purchase price for inflation, has been removed for all asset classes, including equity mutual funds.

Capital Gains Tax	Holding Period	Old Rate	New Rate
Short-Term Capital Gains (STCG)	Less than 12 months	15%	20%
Long-Term Capital Gains (LTCG)	More than 12 months	10%	12.50%

Factors to Consider Before Investing in Sectoral Mutual Funds 

Here are a few key factors to consider before investing in sectoral mutual funds: 

• Sector Concentration and Risk: Sectoral funds focus exclusively on specific sectors, which can lead to high investment risk due to a lack of diversification. Unlike diversified equity funds, which spread investments across sectors, sectoral funds may suffer if the chosen sector performs poorly.
• Investment Goals and Duration: Investors should have clear long-term goals when investing in sectoral funds. Considering the cyclical nature of sector performance, these funds typically require a minimum investment horizon of at least five years to achieve optimal returns.
• Portfolio Exposure: Sectoral/thematic mutual funds should be part of a well-diversified portfolio, with exposure limited to 5-10% of total investments. Given their higher risk profile, excessive weighting in these funds, including the best IT sector mutual funds in India, can increase portfolio volatility.
• Sector Performance Analysis: Sector trends are often cyclical and can affect fund performance. A regular analysis of sectoral trends and company performance can provide insights into potential future returns.
• Risk Management: Setting stop-loss limits around 15-20%  can help mitigate losses and strategically exit underperforming sectors.
• Performance Evaluation: While past returns do not guarantee future performance, analysing historical fund performance across different market cycles may provide valuable insights. Evaluating sector prospects and potential opportunities can aid in making informed investment decisions.

To Wrap It Up…

The active management approach of the best sectoral mutual funds allows investors to align their portfolios with evolving market dynamics, providing a tailored strategy to capitalise on sector-specific growth opportunities. As the investment landscape evolves, high-growth sectoral mutual funds stand out as an attractive option in pursuing financial goals.

Investors must remain vigilant while seizing opportunities and reassessing their portfolios in response to shifting economic climates. Sectoral mutual funds, with their focused investment approach, empower investors to shape their financial destinies actively. This makes them a compelling choice for those seeking a proactive and strategic investment strategy in today’s ever-changing markets.

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Frequently Asked Questions on Sectoral Mutual Funds