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Aditya Birla Capital LimitedAditya Birla Capital Limited (“ABCL”) is a listed systemically important non-deposit taking Non-Banking Financial Company (NBFC) and the holding company of the financial services businesses. ABCL and its subsidiaries/JVs provides a comprehensive suite of financial solutions across Loans, Investments, Insurance, and Payments to serve the diverse needs of customers across their lifecycles. Powered by over 61,600 employees, the businesses of ABCL have a nationwide reach with over 1,690 branches and more than 200,000 agents/channel partners along with several bank partners.
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What is a Sectoral/Thematic Mutual Funds?
A sectoral/thematic mutual fund is an equity-oriented scheme which invests a major part of its portfolio in a particular sector or theme. Common examples include banking funds, energy funds, infrastructure funds, etc.
Advantages of Sectoral/Thematic Mutual Funds
Growth potential
Good sectors can grow considerably, offering returns higher than those offered by the market as a whole. This helps maximise your returns
Diversified portfolio
Sectoral/thematic funds invest in different companies in the same sector or theme. This gives a diversified portfolio, allowing you to invest in different companies simultaneously.
Professional fund management
Sectoral/thematic mutual funds are actively managed schemes wherein the fund managers try to mitigate risks and enhance returns.
Capitalise on Emerging Trends
These funds allow investors to specifically target and potentially benefit from emerging trends or high-growth sectors within the economy.
Explore Sectoral/Thematic Mutual Funds
Most Popular
AUM: 23427(Cr)
Risk: Very High
- MIN. INVESTMENT 500
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹10000
- Get (30 Yrs) ₹24,850*
*Projections/estimations is backtested using historical data.
Most Popular
- AUM: 23427(Cr)
- Risk: High
- MIN. INVESTMENT 1000
- 5 YRS RETURNS 33.32%
- Invest (Per Month) ₹15000
- Get (30 Yrs) ₹34,850*
*Projections/estimations is backtested using historical data.
Sectoral/Thematic Mutual Funds Returns Calculator
REGULAR INVESTMENT
SIP
Invest systematically in regular amounts and build a corpus with a disciplined investing habit.
ONE TIME INVESTMENT
Lump sum
Invest once with the facility of lump sum investing and save at your will. Time the market correctly and earn good returns.
Total Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
Total Amount Invested
₹ 0
after 30 years you will get a return of
₹ 0
Disclaimer: Projections/estimations is backtested using historical data.
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Understanding Sectoral/Thematic Mutual Funds
Table of Contents
What are sectoral/thematic funds?
-
Sectoral or thematic mutual funds invest at least 80% of their portfolio in stocks and securities of companies belonging to a particular sector or theme. For instance, an infrastructure fund might invest in the stocks of energy, power, construction, cement, etc. companies.
What are the features of sectoral/thematic funds?
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Limited diversification as the portfolio is invested in a particular kind of sector or theme
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An actively-managed equity mutual funds
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High risk-return trade-off
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Suitable for investors with a long-term investment horizon and a high risk appetite
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Invest through SIPs or lump sum
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Earn tax-free returns up to ₹1 lakh if you stay invested
What are some of the popular sectors of themes?
Logistics and transportation
Banking and Finance
Manufacturing
Technology
Public Sector Undertakings (PSU)
Energy
Consumption
What should be the investment horizon for sectoral/thematic funds?
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A particular sector/theme might not yield immediate or instant returns
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Moreover, there’s always a risk of short-term volatility
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As such, a long-term investment horizon is suitable
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You can invest for 5 years or more for attractive returns
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You also get a tax benefit on staying invested for a longer tenure
What is the tax implication of sectoral/thematic funds?
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Returns up to ₹1 lakh are tax-free if you stay invested for 12 or more months
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Returns exceeding ₹1 lakh are taxed at 10%
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For redemption within 12 months, returns are taxed at 15%
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Dividends earned, if any, are taxed at your income tax slab rate
What are the payout options?
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Dividend option
Earn dividends on your investment at regular intervals
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Growth option
Accumulate the returns over the investment tenure and get a lump sum amount on redemption
FAQs On Sectoral/Thematic Mutual Funds
Sectoral funds invest in a particular sector, while thematic funds might invest in different sectors of the same theme. However, thematic funds invest in different sectors, aligning with a common theme. For instance, sectoral funds might invest in power, technology, etc. However, if a thematic fund chooses to invest in infrastructure, it can invest in companies belonging to the cement, manufacturing, financing sectors, etc.
The biggest risk involved in sectoral funds is the risk of high concentration. Since these funds concentrate a major portion of their investments in a single sector, a downturn can bring most stocks down. Hence, proper knowledge of the sector and of investments is important before investing in sectoral funds to grab your chances at high returns.
Sectoral and thematic funds, like any other mutual fund, are highly regulated by the SEBI and managed by expert, credible fund managers. This makes them safe investments. However, as far as investment risk is concerned, they carry a significantly high amount of risk. Please ensure that you have your research in place before investing.
Thematic funds are high-risk funds. Hence, having them as 5% of your portfolio and diversifying the rest to handle risk factors is generally advised.
The minimum investment amounts vary as per the fund house you choose. SIPs could begin at as low as ₹100 and lumpsum at ₹5000.
No, sectoral/thematic funds are ideally meant for moderate to long-term investment goals. Investing over 5 years and above usually helps you overcome the high-risk factors.
The thematic index is a new method for analysing thematic fund behaviours. It factors in dynamic market fluctuations rather than traditional performance indicators. This index is usually used for broad investment themes.
First-time equity investors are not advised to invest in sectoral/thematic funds as these funds carry high risks and require a good amount of market and thematic/sectoral knowledge.
Yes, you can invest in sectoral/thematic funds through SIP.
The ideal investment horizon for thematic funds is 3-5 years.
Thematic fund investors should have a high risk appetite plus surety about their investments in terms of the themes/sectors they are investing in and the trends that they’re predicting.
Both sectoral and thematic funds are required by regulation to make at least an 80% investment in equity. Both invest across large-cap , mid-cap , and small-cap equities . Another major common factor is that both are meant for high-risk-appetite investors.
As sectoral and thematic funds are equity funds
, they are taxed as follows:
Short-term capital gain tax
at the rate of 15%, if you hold your investment for up to 1 year.
Long-term capital gain tax
at the rate of 10% if you hold your investment for more than 1 year (and if the profit is >₹1 Lakh). There is no indexation benefit in this case.
Yes, you can withdraw your thematic/sectoral funds anytime as per your wish, keeping in mind the possible exit load.
Thematic funds invest as per their theme in various companies from various sectors. For example, an infrastructure thematic fund would invest in steel, cement, and other sectors involved in infrastructure.
On an average, thematic funds have delivered around 21% returns.
Downside risk factor - Thematic/sectoral funds are ones which concentrate your money in one particular sector or trend. If the trend reverses or the sector doesn’t perform well, the fund value will fall altogether. So, make sure you are ready for the high risk levels before investing in these funds.
Investment goals - Make sure that your personal financial goals are aligned with the fund’s objectives.
Industry knowledge - Mitigation of risk in this type of fund requires you to study the industry or trend you are investing in thoroughly as it will help you pick the right fund.
Types of Equity Funds
Funds Based On Market Capitalisation
Funds Based On Investment Style
Other Asset Class Funds
ETF Funds
Invest in funds listed and traded on the stock exchange
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Fund of Funds
Mutual funds that invest in other mutual funds both in India and globally
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Hybrid Funds
Get a mix of equity, debt and other asset classes for a diversified portfolio
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Index Fund
Passively-managed mutual funds tracking a particular index
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