Best Thematic Mutual Funds
Thematic mutual funds are often called sectoral mutual funds due to their portfolio concentration in a specific sector. While sectoral funds concentrate on a single sector, thematic funds take a broader approach by investing in companies across multiple sectors that align with a common theme or investment idea. Learn about some of the best thematic mutual funds in 2025 to prepare yourself for calculated risks.
Benefits of Investing in the Best Thematic Mutual Funds
Here are the benefits that you can reap by investing in the best thematic mutual funds:
- Thematic funds can potentially ascertain high growth and returns when the stocks in the portfolio perform well.
- If you invest in these funds for the long term for instance 5 to 7 years, you can reap the benefits of high returns.
- Even though thematic mutual funds are high-risk investments, the expertise of the fund managers can help you earn potential returns for the defined investment horizon.
Factors to Remember While Investing in the Best Thematic Mutual Funds
To understand what are thematic mutual funds and how to invest in these funds, here are the factors to remember before you invest:
- Due to high equity exposure, thematic funds are subject to market risks and volatility. As a result, you need to conduct market research and past performance analysis before investing in these funds.
- Liquidity of these funds might be a challenge after investment as fund houses might find it challenging to sell thematic mutual funds with limited sellers in the market.
- As thematic mutual funds invest in a specific sector or industry, you might find it difficult to diversify your investment portfolio. However, if you are focused on a particular sector, you can invest in these funds.
- Economic and business cycle downturns significantly affect the performance of sectoral funds. As a result, if a particular sector is bullish, you are likely to face losses. Ensure you are aware of the industry performance and the performance of the companies in the fund portfolio before investing.
An Overview of Top 5 Thematic Mutual Funds
Here are the snapshots of some of the best thematic mutual funds in India in 2025:
1. ICICI Prudential India Opportunities Fund
ICICI Prudential India Opportunities Fund (Direct Growth) invests 93.9% in Indian equities, wherein 63.08%, 10.92% and 3.59% are in large cap, mid cap and small cap stocks. Further, the debt component of the fund includes 2.3% government securities.
- Asset Under Management: ₹23,859.65 crore approximately
- Launch Date: January 2019
- Expense ratio: 0.69%
- Investment Details: Equity (93.9%), Debt (2.31%), Others (3.78%)
2. ICICI Prudential Technology Fund
ICICI Prudential Technology Fund (Direct Growth) allocates 93.77% of its portfolio to domestic equities, with 54.89% in large-cap, 9.96% in mid-cap and 9.19% in small-cap stocks. Additionally, it holds 1% in government securities.
- Asset Under Management: ₹12,511.36 crore approximately
- Launch Date: January 2013
- Expense Ratio: 1.05%
- Investment Details: Equity (97.23%), Debt (0.99%), Others (1.77%)
3. Tata Digital India Fund
The investment portfolio of Tata Digital India Fund (Direct Growth) includes 95.68% domestic equities, wherein 60.25% is in large cap stocks, 6.98% is in mid cap stocks and 13.77% in small cap stocks. As an investor, you can compare this fund with its benchmark Nifty IT TRI before investing to understand its potential performance.
- Asset Under Management: ₹11,068.17 crore approximately
- Launch Date: December 2015
- Expense Ratio: 0.42%
- Investment Details: Equity (95.68%), Others (4.32%)
4. ICICI Prudential Business Cycle Fund
ICICI Prudential Business Cycle Fund (Direct Growth) balances its portfolio with 63.31% in large caps, 8.38% in mid caps and 4.65% in small caps, while also securing stability with 1.55% in government securities. It is managed by Anish Tawakley, Lalit Kumar, Sharmila Dmello & Manish Banthia.
- Asset Under Management: ₹11,028.96 crore approximately
- Launch Date: January 2021
- Expense Ratio: 0.74%
- Investment Details: Equity (90.89%), Debt (1.55%), Others (7.55%)
5. SBI Energy Opportunities Fund
SBI Energy Opportunities Fund (Direct Growth) invests 96.22% in domestic stocks, with 51.46% in large caps, 21.8% in mid caps and 9.2% in small caps. A small portion of 0.06% goes into government securities for stability.
- Asset Under Management: ₹8,864.28 crore approximately
- Launch Date: February 2024
- Expense Ratio: 0.77%
- Investment Details: Equity (96.22%), Debt (0.06%), Others (3.72%)
Key Takeaway
The best thematic mutual funds can potentially offer high returns when the underlying sectoral stocks perform well. However, investors need to be aware of the high risk associated with these funds during business cycle downturns.
Ensure you choose your funds based on detailed awareness about expense ratio, assets under management, debt and equity composition. In addition, check the company details of the underlying stocks to optimise the potential risk-return ratio.
Frequently Asked Questions
1. Where do the best thematic mutual funds invest?
Usually, a thematic mutual fund invests 80% of its funds in a specific sector. For instance, a Thematic Infrastructure Fund invests in the infrastructure sector. If an investor chooses such a fund, he/she will have to be invested in that particular sector.
2. How much corpus should I invest in the best thematic mutual funds?
Industry experts suggest that investors should not invest more than 10% of their investment portfolio in sectoral or thematic mutual funds. As these funds are subject to high market risks, investing a higher proportion of your portfolio in these funds can result in potential risks associated with the returns.
3. How long should I stay invested in the best thematic mutual funds?
As an investor, you can invest in some of the best thematic mutual funds for a time horizon of 3 to 5 years or a longer term. This can help you minimise the risks and optimise the returns of your investment.
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