List of Best Sectoral Mutual Funds in India 2025
Many investors diversify their portfolios by investing in mutual funds. They often choose asset classes such as equity, debt, real estate, and hybrid funds. Another popular way to diversify is by investing in different economic sectors through sectoral mutual funds.
Sectoral mutual funds are open-ended equity schemes that focus on sectors like energy, infrastructure, healthcare, and utilities. These funds invest in companies with different market capitalisations within the same sector. When a sector performs well, these funds can deliver strong returns and help investors use their market knowledge to earn profits.
This article lists the top sectoral funds across various sectors and themes based on their 5-year 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
ICICI Pru Technology Fund
ICICI Pru Technology Fund invests in technology-driven companies, aiming for long-term capital growth through exposure to high-growth sectors such as IT and software.
Tata Digital India Fund
Tata Digital India Fund invests in digital transformation companies in India, seeking long-term growth in areas such as e-commerce, fintech, and technology.
SBI Technology Opp Fund
SBI Technology Opportunity Fund invests in technology companies with strong growth potential, aiming to achieve capital appreciation through the digital economy and innovation-led sectors.
Aditya Birla SL Digital India Fund
The Aditya Birla SL Digital India Fund invests in high-growth digital companies in India, focusing on sectors such as IT, e-commerce, and fintech to generate long-term wealth.
Franklin India Technology Fund
Franklin India Technology Fund invests in global technology companies, seeking capital appreciation through investments in software, hardware, and digital solutions.
HDFC Technology Fund
HDFC Technology Fund invests in leading tech companies in India and globally, aiming for long-term growth through innovation in IT and digital services.
Motilal Oswal Digital India Fund
Motilal Oswal Digital India Fund invests in Indian companies that benefit from digital transformation, focusing on sectors such as fintech, e-commerce, and digital infrastructure.
Edelweiss Technology Fund
Edelweiss Technology Fund invests in high-growth technology companies, aiming for long-term capital growth through exposure to global tech trends and innovation-focused industries.
Kotak Technology Fund
Kotak Technology Fund invests in companies with significant exposure to the technology sector, aiming for long-term capital growth in digital and tech-enabled industries.
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 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.
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 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 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.
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.
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
High growth sector funds may require a longer investment horizon to reach their peak, as each sectoral fund has unique characteristics. It is important for investors to conduct their own research and seek professional advice before making investment 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 16th October 2025 include:
– ICICI Pru Technology Fund
– Tata Digital India Fund
– SBI Technology Opp Fund
– Aditya Birla SL Digital India Fund
– Franklin India Technology Fund
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.
