What are the different sectoral or thematic mutual fund types in India?
Sectoral mutual funds focus on a single industry, such as technology, healthcare, or energy, aiming to benefit from growth in that sector. While they can offer high returns if the sector performs well, they are riskier due to their concentrated nature. These funds suit investors with a strong understanding of the sector and a higher risk tolerance. On the other hand, Thematic mutual funds invest in broader trends, like electric vehicles or green energy, across various industries connected to the theme. Although risky, they offer more diversification than sectoral funds and focus on long-term growth. These funds are ideal for investors who understand the theme and are prepared for long-term investments. Here are examples of various types of sectoral and thematic mutual fund types:
Sectoral Fund types:
- FMCG (Fast-Moving Consumer Goods): Invests in companies producing everyday products like soap, snacks, and beverages. Example: ICICI Pru FMCG Fund.
- Information Technology (IT): Focuses on technology companies or those dependent on technology, such as the ICICI Pru Technology Fund.
- Banking & Financial Services: Invests in banks and financial institutions. Example: HDFC Banking and Financial Services Fund
- Infrastructure: Targets companies involved in infrastructure projects such as roads, bridges, and factories. Example: SBI Infrastructure Fund
- Pharmaceuticals & Healthcare: Focuses on pharmaceutical and healthcare companies. Example: Kotak Healthcare Fund
- Energy & Power: Invests in energy and power companies. Example: Tata Resources & Energy Fund
- Automobile: Focuses on companies involved in car manufacturing and related industries. Example: SBI Automotive Opportunities Fund
- Manufacturing: Invests in companies promoting manufacturing activities, often aligned with initiatives like “Make in India.” Example: HDFC Manufacturing Fund
Sectoral Fund Examples: Quant Infrastructure Fund, DSP Healthcare Fund, ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund, Invesco India Infrastructure Fund, Bandhan Infrastructure Fund, Bank of India Mfg & Infra Fund, Mirae Asset Healthcare Fund, SBI Healthcare Opp Fund, Tata Digital India Fund, ICICI Pru Technology Fund
Thematic Funds:
- Consumption: Invests in companies related to consumer needs, such as FMCG, entertainment, and automobiles. Example: Mirae Asset Great Consumer Fund.
- Ethical & Shariah Compliant: Invests based on specific ethical guidelines or follows Shariah compliance—for example, the Tata Ethical Fund.
- Environmental, Social, and Governance (ESG): Focuses on companies that meet environmental, social, and governance standards, such as Kotak ESG Exclusionary Strategy Fund.
- Quantitative (Quant): Uses algorithms and quantitative models for making investment decisions, such as ICICI Pru Quant Fund.
- Business Cycle: Invests according to the economic cycle, targeting sectors expected to perform well during specific phases, such as the Axis Business Cycle Fund.
- Innovation Fund: Innovation funds invest in companies leading technological breakthroughs in AI, biotech, clean energy, and other disruptive sectors. They cater to investors seeking growth from cutting-edge advancements and industry transformations.
Thematic Fund Examples: Franklin India Opportunities Fund, ICICI Prudential India Opportunities Fund, ICICI Prudential Manufacturing Fund, HDFC Housing Opportunities Fund, Aditya Birla Sun Life Manufacturing Equity Fund, ICICI Prudential FMCG Fund, Sundaram Services Fund.
Sectoral and thematic mutual funds can offer attractive returns but have higher risk as they focus on specific sectors or themes. Poor performance in the chosen area can impact your investment significantly. Diversifying across multiple sectors or themes is a smart way to manage this risk.
These funds can still be valuable in your overall wealth creation strategy, especially when aligned with long-term goals like retirement or wealth creation. An AMFI-registered mutual fund distributor or advisor can help you choose suitable funds, balance your portfolio, and ensure your investments align with your goals. A trusted mutual fund distributor or advisor can help you make informed, goal-based investment decisions.
