List of the Top Sectoral Mutual Funds in India
Sectoral mutual funds are equity schemes that invest predominantly in companies from a single industry or a closely linked set of industries. Under SEBI’s mutual fund categorisation, these funds must allocate at least 80% of assets to the chosen sector, which creates concentrated exposure compared with diversified equity funds. This article lists the top sectoral funds across various sectors and themes based on their AUM.
List of Best Sectoral Mutual Funds in India (2026)
Here is a list of the top sectoral mutual funds based on their AUM:
| Fund Name | Sub Category | AUM (Cr.) | CAGR 3Y (%) | Expense Ratio (%) |
|---|---|---|---|---|
| ICICI Pru Technology Fund | Sectoral Fund - Technology | 15,892.29 | 12.91 | 0.99 |
| Tata Digital India Fund | Sectoral Fund - Technology | 12,255.16 | 12.91 | 0.43 |
| ICICI Pru Banking & Fin Serv Fund | Sectoral Fund - Banks & Financial Services | 11,153.71 | 16.86 | 1 |
| SBI Banking & Financial Services Fund | Sectoral Fund - Banks & Financial Services | 10,105.98 | 22.87 | 0.73 |
| ICICI Pru Energy Opportunities Fund | Sectoral Fund - Energy & Power | 9,828.30 | 0.00 | 0.58 |
| SBI Energy Opportunities Fund | Sectoral Fund - Energy & Power | 9,128.58 | 0.00 | 0.8 |
| ICICI Pru Infrastructure Fund | Sectoral Fund - Infrastructure | 8,133.93 | 26.14 | 1.15 |
| Nippon India Pharma Fund | Sectoral Fund - Pharma & Health Care | 7,875.40 | 23.12 | 0.92 |
| Nippon India Banking & Financial Services Fund | Sectoral Fund - Banks & Financial Services | 7,752.54 | 20.09 | 0.96 |
| Nippon India Power & Infra Fund | Sectoral Fund - Energy & Power | 6,772.68 | 27.00 | 0.96 |
Note: The data on the list of the best thematic mutual funds is from 6th February 2026. 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)
- AUM: 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
ICICI Pru Technology Fund
ICICI Pru Technology Fund is a sectoral equity scheme that invests predominantly in technology and technology-enabled companies. The fund focuses on businesses across information technology, software services, digital infrastructure, and emerging technology segments within the Indian equity market.
Tata Digital India Fund
Tata Digital India Fund invests primarily in companies involved in digital transformation and technology-driven businesses. The scheme’s portfolio includes firms across IT services, digital platforms, fintech, e-commerce, and other technology-enabled sectors contributing to India’s digital economy.
ICICI Pru Banking & Fin Serv Fund
ICICI Pru Banking & Fin Serv Fund is a sectoral scheme investing in banking and financial services companies. The fund’s portfolio includes banks, non-banking finance companies, insurance firms, asset management companies, and other financial sector entities.
SBI Banking & Financial Services Fund
SBI Banking & Financial Services Fund invests predominantly in equity securities of banking and financial services companies. The scheme focuses on commercial banks, NBFCs, insurance providers, housing finance companies, and other financial sector participants across market capitalisations.
ICICI Pru Energy Opportunities Fund
ICICI Pru Energy Opportunities Fund is a sectoral equity scheme investing in energy and energy-related companies. The fund’s portfolio spans oil and gas exploration, refining, distribution, power generation, renewable energy, and other energy sector segments.
SBI Energy Opportunities Fund
SBI Energy Opportunities Fund invests primarily in equity shares of companies operating in the energy sector. The scheme covers businesses across oil and gas, power utilities, renewable energy, coal, transmission infrastructure, and allied energy industry segments.
ICICI Pru Infrastructure Fund
ICICI Pru Infrastructure Fund is a thematic equity scheme investing in infrastructure and infrastructure-related companies. The fund focuses on sectors including construction, cement, power, transportation, logistics, telecommunication networks, and other core infrastructure segments across the economy.
Nippon India Pharma Fund
Nippon India Pharma Fund invests predominantly in pharmaceutical and healthcare companies. The scheme’s portfolio includes businesses across drug manufacturing, research and development, active pharmaceutical ingredients, generic medicines, speciality pharmaceuticals, diagnostics, and healthcare services segments.
Nippon India Banking & Financial Services Fund
Nippon India Banking & Financial Services Fund is a sectoral scheme focusing on banking and financial services companies. The fund invests across commercial banks, private banks, NBFCs, asset management firms, insurance companies, and other financial intermediaries.
Nippon India Power & Infra Fund
Nippon India Power & Infra Fund invests in companies operating in power generation and infrastructure development sectors. The scheme’s portfolio includes thermal power, renewable energy, transmission and distribution, construction, roads, ports, and other infrastructure-related businesses.
What are Sectoral Funds?
Sectoral mutual funds are equity schemes that focus on specific sectors of the economy, such as utilities, energy, technology, healthcare and infrastructure. These funds invest in company stocks within these sectors across different market capitalisations and security types. They help investors gain from the top-performing stocks in selected sectors.
Taxation on Sectoral Mutual Funds as per the Union Budget 2024-25
Here’s a table summarising the taxation on sectoral mutual funds as per the Union Budget 2024-25. These changes are aimed at standardising the tax treatment for sector-specific investments in India.
| Type of Gain | Tax Rate | Exemption Limit | Applicable Holding Period |
| Short-Term Capital Gains (STCG) | 20% | Nil | Less than 12 months |
| Long-Term Capital Gains (LTCG) | 12.50% | ₹1.25 lakh | 12 months or more |
| Dividends | 10% TDS | ₹5,000 (threshold for TDS) | Applicable on dividend income exceeding ₹5,000 per fund house |
Note: These tax rules are effective from April 1, 2025, and apply to all transactions in sectoral mutual funds from that date.
How to Invest in Sectoral Mutual Funds?
You can easily start to invest in sectoral funds by following these steps:
- To invest in the best sectoral mutual funds, you can visit a mutual fund investment platform such as smallcase.
- The next step is to research and identify the sectoral mutual funds that match your financial goals. Tools like the Tickertape Mutual Fund Screener can help you filter and compare It or finance sector mutual funds based on parameters such as returns, expense ratio, and fund size.
- Once you shortlist the funds, visit smallcase, log in, and search for the fund by name. You can then choose the investment mode, either a one-time lump sum or a sectoral mutual fund SIP, and complete the process.
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade model portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered investment experts (also known as smallcase managers)
- smallcase offers over 500+ stock portfolios, created by 200+ managers
Here are a few popular smallcases among new investors:
Disclosures for aforementioned smallcases
How Do Sectoral Funds Work?
The Indian mutual fund industry encompasses various sectors, including IT, banking, pharmaceuticals, chemicals, automobiles, and natural resources. Some sectors perform exceptionally well in the medium to long term. Sectoral funds help investors capture these opportunities by focusing on specific sectors.
Each sector consists of businesses that offer similar products or services. For example, a pharma sectoral fund invests in companies like Cipla along with healthcare facilities and diagnostic centres, creating a broader portfolio. These funds invest in large-cap, mid-cap, and small-cap companies that belong to the chosen sector. SEBI requires sectoral funds to invest at least 80% of their total assets in equity and equity-related instruments of their specified sector.
Types of Sectoral Mutual Funds
Here are the main types of sector-specific mutual funds available in India.
- Utility Funds: These thematic mutual funds invest in companies from the utility sector and aim to provide stable dividends.
- Natural Resources Funds: These funds invest in industries such as oil, natural gas, energy, forestry, and timber and focus on growth in natural resources.
- Technology Funds: These IT sector mutual funds give investors exposure to the technology sector and focus on technological innovations. They invest in technology stocks available in the market.
- Financial Funds: These finance sector mutual funds invest mainly in companies from the financial industry, including banking, insurance, and accounting firms.
- Communications Funds: These funds invest in the telecommunications and internet sectors and match the growth in the communication industry.
- Healthcare Funds: These funds invest in pharmaceutical companies, for-profit medical institutions, and biotechnology firms that drive progress in the healthcare industry.
- Precious Metals Funds: These funds provide exposure to precious metals, including gold, platinum, silver, copper, and palladium, and attract investors interested in the metals market.
- Real Estate Funds: These funds enable small investors to participate in the real estate market, offering income and growth opportunities.
Note: These are some of the main sectors used to categorise sectoral mutual funds, and more sectors may also exist.
Features of Sectoral Mutual Funds
- Concentrated Sector Exposure: Sectoral mutual funds invest at least 80% of their assets in equity securities of companies within a specific sector or industry. This concentrated approach ties the fund’s performance directly to that particular sector, unlike diversified equity funds that spread investments across multiple industries.
- Higher Volatility Profile: Due to their narrow investment mandate, sectoral funds typically experience higher volatility compared to diversified equity schemes. The fund’s NAV movements closely track the sector’s performance, which can be influenced by industry-specific regulatory changes, technological disruptions, or business cycles.
- Regulatory Classification: SEBI categorises sectoral funds under equity schemes with specific investment mandates. Common categories include Banking & Financial Services, Technology, Pharmaceuticals, Energy, Infrastructure, FMCG, and Commodities. Each fund must maintain its prescribed sector allocation as per the scheme documentation.
- Cyclical Performance Patterns: Sectoral funds often display cyclical performance based on economic cycles and sector-specific growth phases. Infrastructure funds may perform differently during government spending cycles compared to banking funds during interest rate movements, leading to significant performance variation across time periods.
Differences Between Thematic Funds and Sectoral Mutual Funds
| Feature | Thematic Funds | Sectoral Mutual Funds |
| Investment approach | Invest around a broader idea or trend that can span multiple industries | Invest in one specific sector or industry |
| Portfolio spread | May hold companies from different sectors linked to the theme | Holdings largely come from a single sector |
| Concentration level | Usually less concentrated than pure sector strategies | Highly concentrated exposure |
| SEBI allocation rule | Minimum 80% in stocks aligned to the theme | Minimum 80% in the chosen sector |
| Risk profile | Depends on how wide the theme is | Typically higher due to single-sector dependence |
| Performance drivers | Influenced by trend adoption, policy, and multi-sector earnings | Linked directly to the cycle of that sector |
| Diversification benefit | Limited, but broader than sector funds | Very limited outside the sector |
Benefits of Investing in Sectoral Mutual Funds
Sectoral mutual funds offer several benefits to investors.
- Focused Exposure and Potential High Returns: Instead of spreading investments across various industries, sectoral funds concentrate on a single sector. This focus helps investors capture the growth potential of that sector efficiently.
- Strategic Diversification within Sectors: Although sectoral funds do not diversify across industries, they invest in companies of different sizes within one sector. This strategy reduces risks linked to the performance of individual stocks in that sector.
- Professional Management and Expertise: Professional fund managers who understand specific sectors handle sectoral funds. Their expertise helps investors who do not have time or knowledge to choose individual stocks in the sector.
- Long-Term Investment Potential: Investors can align sectoral fund investments with long-term goals like retirement planning. By selecting sectors with strong growth potential through careful research, they can aim for returns that beat inflation over time.
Risks Involved While Investing in Sectoral Mutual Funds
Sectoral funds mainly invest in equity instruments and carry specific risks.
- Concentration Risk: Sectoral mutual funds focus heavily on a single sector, making them highly concentrated and among the riskiest types of mutual funds.
- Liquidity Risk: Fund managers may struggle to sell securities during market downturns, potentially resulting in losses.
- Volatility Risk: Fluctuations in the sector can directly impact fund performance, potentially increasing both returns and losses based on sector movement.
- Cyclical Nature: Thematic mutual funds in India are influenced by economic cycles that impact specific industries, affecting fund performance.
- Limited Diversification: Investing in a single industry limits diversification and increases potential losses during economic shifts that affect that sector.
Factors to Consider Before Investing in Sectoral Mutual Funds
Before investing in sectoral mutual funds, keep these key factors in mind.
- Sector Concentration and Risk: Sectoral funds invest only in specific sectors, which increases investment risk because they lack diversification. Diversified equity funds spread investments across sectors, but sectoral funds can suffer if the selected sector performs poorly.
- Investment Goals and Duration: Investors should set clear long-term goals before investing in sectoral funds. Since sector performance moves in cycles, these funds usually need a minimum investment period of five years to deliver good returns.
- Portfolio Exposure: Sectoral or thematic mutual funds should make up only a small portion of a diversified portfolio. Ideally, they should cover 5 to 10% of total investments. Because these funds have a higher risk level, putting too much money into them, even in the best IT sector mutual funds in India, can increase portfolio volatility.
- Sector Performance Analysis: Sector trends move in cycles and affect fund performance. Regularly studying sector trends and company results can give useful insights into possible future returns.
- Risk Management: Setting stop-loss limits of around 15 to 20 percent helps reduce losses and allows investors to exit weak sectors at the right time.
- Performance Evaluation: Although past returns cannot guarantee future performance, studying historical results across market cycles gives helpful information. Assessing sector prospects and opportunities supports better and more informed investment decisions.
Who Should Invest in Sectoral Mutual Funds
Sectoral mutual funds, including the best thematic mutual funds, offer potential high returns but come with high risk due to their lack of diversification. Before investing, it’s essential to assess your financial goals, risk tolerance, and investment timeframe. These funds suit:
- Active and informed investors who stay updated with market trends and can predict sector performance over the medium to long term.
- Investors with a high-risk appetite who are comfortable with the focused risk of sector-focused mutual funds.
- Investors using tactical allocation strategies to capitalise on sectoral mutual funds by entering during downturns and exiting during upswings.
To Wrap It Up…
The best sectoral mutual funds use active management to help investors align their portfolios with changing market trends. This strategy focuses on sector-specific growth opportunities, making thematic equity funds a compelling choice for achieving financial goals. As market dynamics shift, high-growth sectoral mutual funds offer targeted exposure to emerging sectors. Investors should stay alert and seize opportunities, regularly reviewing their portfolios in response to economic shifts. Top sectoral mutual funds in India use a focused investment approach, allowing investors to take control of their financial futures. This makes these funds an excellent option for those seeking a proactive investment strategy in today’s rapidly changing markets. Sectoral mutual fund performance can have a significant impact on long-term growth when managed effectively.
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Frequently Asked Questions on Sectoral Mutual Funds
It’s often recommended to stay invested in high growth sector funds for a longer period, as it may take time for them to reach their peak. However, each sectoral fund for long-term has unique characteristics, so investors must perform thorough research and consult a financial advisor before making decisions.
Sectoral funds focus on specific economic sectors, such as energy, healthcare, or finance. These thematic mutual fund investments allow investors to target growth in particular industries, capitalising on sector trends. Investors should consider sectoral fund benefits, including potential high returns, but be aware of the risks.
The returns from sectoral mutual funds vary based on the sector’s performance and broader market conditions. Top-performing sectoral mutual funds can offer high returns, but risks of thematic mutual funds should also be considered as past performance does not guarantee future results.
It’s ideal to invest in sectoral funds for long-term when a sector is in an up-cycle. The strategy is to buy early in the cycle and hold, ensuring that you benefit from growth. Patience is key, as sector performance can fluctuate over time.
The top-performing sectoral mutual funds as of 6th February 2026. Sorted according to their AUM include:
– ICICI Pru Technology Fund
– Tata Digital India Fund
– ICICI Pru Banking & Fin Serv Fund
– SBI Banking & Financial Services Fund
– ICICI Pru Energy Opportunities Fund
Note: The funds on this list are listed for educational purposes and are not meant to be recommendatory.
While sectoral funds target specific industries and carry higher risks, they offer concentrated exposure to high-growth sectors. Index funds provide broad market exposure with lower fees and less risk. Your choice depends on your risk appetite and investment goals, especially when considering thematic fund investment.
Sectoral funds typically require longer investment horizons due to their high volatility and cyclical performance patterns. The concentrated sector exposure means short-term performance can vary significantly based on sector-specific business cycles.
