Top Thematic Mutual Funds In India

Summary
Thematic funds invest around a particular economic theme or trend, such as PSUs, ESG, or an economic theme.

ICICI Pru India Opp and ICICI Pru Business Cycle Fund are two of the leading funds, based on their AUM as of 10 August 2026.

It is essential to assess the underlying factors behind the theme performance, investment horizon, and cost.

They include higher concentration and volatility risk due to heavy dependence on a particular theme.

Thematic funds invest in a particular theme or trend, including multiple sectors and industries linked to the theme. Since these funds focus on a concentrated theme, they can provide high growth potential but also include high market volatility, concentration, and economic risk.   

Best 10 Thematic Mutual Funds: Quick Comparison

Thematic mutual funds are equity funds that focus on economic trends and themes, including manufacturing, infrastructure, or technology. The best thematic mutual funds in India as of 10th August, 2026 are listed below. The list below includes the best thematic funds, based on their NAV, AUM, expense ratio, and returns.

Name	NAV	AUM (In ₹ Crores)	Expense Ratio (%)	1 year Returns (%)	3 years Returns (%)	5 years Returns (%)	Benchmark
Aditya Birla SL PSU Equity Fund	40.36	6,018.74	0.71	16.71	24.75	24.54	BSE PSU TR INR
SBI PSU Fund	38.55	6,683.53	0.86	13.05	25.29	24.38	BSE PSU TR INR
Invesco India PSU Equity Fund	79.66	1,472.61	0.97	9.15	23.83	22.67	BSE PSU TR INR
ICICI Pru Innovation Fund	20.55	7,843.53	1.22	10.4	20.8	24.5	Nifty 500 TR index
ICICI Pru Manufacturing Fund	44.01	6,842.52	1.18	18.59	23.42	21.40	Nifty India Manufacturing TR Index
Quant ESG Integration Strategy Fund	42.54	312.31	1.86	25.84	18.13	20.12	Nifty 100 ESG Total Return Index
ICICI Pru India Opp Fund	40.61	37,256.79	0.91	6.56	17.05	20.06	Nifty 500 Total Return Index
Quant Quantamental Fund	27.38	1,652.82	1.57	16.31	17.67	19.95	Nifty 200 Total Return Index
Franklin India Opportunities Fund	297.99	9,192.08	0.89	8.28	23.11	19.85	Nifty 500 Total Return Index
ICICI Pru Business Cycle Fund	26.78	16,137.50	0.95	4.61	17.33	17.57	Nifty 500 Total Return Index

Top 10 Thematic Mutual Funds

Thematic funds primarily invest in stocks of a certain trend or theme, rather than different sectors. While thematic funds can provide significant returns over the long term, choosing the right fund can be challenging. Below is a description of the top 10 thematic funds, including their strength and weaknesses.

Aditya Birla SL PSU Equity Fund

Aditya Birla SL PSU Equity Fund maintains a PSU-focused portfolio, allowing investors to invest in the public sector. The fund has recorded a strong 1-year return of 16.71% and a 5-year return of 24.54%, with a low expense ratio of 0.71%. However, they are sensitive to government policies and the performance of public sector companies. 

SBI PSU Fund

SBI PSU Fund includes a large asset base of ₹6,683.53 crore with exposure to government-backed industries. The fund has delivered a strong 5-year return of 24.38% but holds one of the lowest expense ratios of 0.86% among the listed funds, which directly impacts the overall return on the fund.

Invesco India PSU Equity Fund

Invesco India PSU Equity Fund mostly focuses on multiple public sector companies, allowing investors to directly invest in PSU-theme investments and benefit from improving fundamentals. The fund has an AUM of ₹1,472.61 crore with an expense ratio of 0.97%. However, the narrower investment strategy impacts the fund during volatile markets.

ICICI Pru Innovation Fund

ICICI Pru Innovation Fund focuses on benefiting from innovation strategies and themes. It provides exposure to equity stocks in global mutual funds or ETFs while holding an asset size of ₹7,843.53 crore and an expense ratio of 1.22%. 

ICICI Pru Manufacturing Fund

ICICI Pru Manufacturing Fund primarily invests in the manufacturing sector, including industrials, engineering, automobiles, capital goods, etc. It focuses on India’s infrastructure sector and is exposed to broader manufacturing industries. The fund has an AUM of ₹6,842.52 crore with one of the highest expense ratios among listed funds of 1.18%.

Quant ESG Integration Strategy Fund

Quant ESG Integration Strategy Fund includes environmental, social, and governance considerations in their investment portfolio. It focuses on companies with strong sustainable business and governance practices. The fund has the lowest asset size of ₹312.31 crores with the highest expense ratio of 1.86%.

ICICI Pru India Opp Fund

ICICI Pru India Opp Fund is a flexible investment fund and invests across different sectors, seeking opportunities and making necessary adjustments to benefit from different market conditions. The allocation highly depends on the fund manager’s decision. The fund has the highest asset size of ₹37,256.79 crores amongst the listed funds and an expense ratio of 0.91%. 

Quant Quantamental Fund

Quant Quantamental Fund invests after analysing quantitative and fundamental aspects of different businesses. It helps to systematically assess a company’s quantitative factor along with its fundamentals to evaluate its financial performance and valuation. It has an AUM of ₹1,652.82 crore and an expense ratio of 1.57%. 

Franklin India Opportunities Fund

Franklin India Opportunities Fund invests in companies that have the potential to grow in future across different sectors of the market. It focuses on benefiting from long-term growth opportunities from special situation themes. However, the fund can be affected by certain market conditions. It holds an AUM of ₹9,192.08 crore and an expense ratio of 0.89%.

ICICI Pru Business Cycle Fund

ICICI Pru Business Cycle Fund focuses on making investments based on economic cycles. The fund aims to benefit from different phases of the economic cycle and make adjustments accordingly. However, incorrect assumptions or inefficient manager decisions can heavily impact the fund. It has an asset size of ₹16,137.50 crore with an expense ratio of 0.95%. 

How We Selected These Thematic Funds?

The thematic mutual funds are selected based on their qualitative and quantitative attributes. 

1. Investment Theme: They mostly focus on theme-based funds, including PSUs, infrastructure, business cycle, and ESG, seeking opportunities to benefit from different phases and trends.
2. Long-term Growth Potential: They mostly prefer themes that could sustain in the long run, backed by economic or structural reasons, instead of short-term market trends. They focus on concepts that will benefit them for a longer period.
3. Performance Through Different Cycles: The fund’s past performance, including its 3-year return and 5-year return, along with its 1-year return, indicates the consistency and efficiency of the fund’s stock selection and allocation through various economic cycles.
4. Fund Size and Cost: AUM helps investors understand the size of the fund and investors’ confidence in it. It is equally important to compare expense ratios, since they heavily impact the net returns earned by the fund.

Thematic Funds VS Other Funds Category

The table below shows how thematic mutual funds differ from other mutual funds.

Basis	Thematic Fund	Sectoral Fund	Index Fund
Investment Style	Invests in a particular theme or economic trend	Invests mostly in a specific sector	Invests based on a specific market index
Diversification	Moderate to low	Low	Depends on the selected index
Return	High during good performance by theme or trend	High during sector upcycles	Depends on the market
Suitable for	Investors with high risk tolerance	Investors interested in a specific sector	Investors seeking passive investing with a low cost

Benefits and Risks of Thematic Mutual Funds

The benefits of investing in thematic mutual funds are listed below.

1. Opportunity to invest in emerging trends: Theme-oriented funds provide an opportunity for investments in structural trends, including infrastructure, technology, and ESG. It enables investors to generate returns when the specific theme expands in future.
2. Growth opportunities: When a theme turns out to be successful, it grows faster than the economy or stock market. When the thematic fund performs well, investors get the opportunity to earn higher returns.
3. Diversification: Investors prefer to invest in several companies with the same theme. This allows them to minimise the risk of single stock performance. However, the risk related to the theme exists.
4. Exposure to economic cycles: In certain cases, themes may be highly influenced by structural economic phases. A growing manufacturing industry might create opportunities to earn higher returns for manufacturing-oriented funds. 

The risks associated with thematic mutual funds are listed below.

1. Concentration risk: The primary risk in relation to the fund is the concentrated exposure to a particular theme. Therefore, if the theme does not perform well, most of the stocks of its portfolio may fall at the same time.
2. Theme timing risk: A thematic fund may not generate appropriate returns immediately. Therefore, if the fund fails to enter the market during a rally, investors may earn lower returns if valuations have already increased.
3. Higher volatility: Thematic funds tend to carry high volatility risk, since they heavily depend on a specific theme, economic trend, or sector.
4. Economic and policy risk: Most themes heavily depend on government policies, regulation, and economic phases, which may impact the fund during certain changes. 

Who Should Consider And Avoid Thematic Mutual Funds?

Investors who should opt for thematic mutual funds are mentioned below.

1. Experienced Investors: Investors who have been investing for a long time and have the knowledge of different sectors, markets, and economic cycles can choose to invest in thematic mutual funds.
2. High Risk Takers: Investors who hold a high risk tolerance and are comfortable with significant portfolio adjustments can choose to invest in these funds.
3. Long-term Planners: Since thematic funds may take a long time to grow and earn potential returns, investors with a long-term investment strategy may opt for these funds.

Investors who should avoid thematic mutual funds are mentioned below.

1. Beginners: Investors who are new to investing and do not have much knowledge of various sectors and how they are affected can opt to avoid thematic mutual funds. 
2. Risk-averse Investors: Investors with a low risk tolerance and who prefer to earn steady returns can choose to avoid these funds.
3. Short-term Traders: Investors with short-term investment plans who make decisions based on temporary market movements may choose not to invest in thematic mutual funds.

How To Choose A Thematic Mutual Fund?

Thematic funds invest in theme-based sectors and companies that have the potential for future expansion and require a long time horizon. Therefore, investors must analyse and choose a suitable thematic fund that aligns with their objective and risk appetite.

1. Understand the theme driver: Investors must evaluate the factors that influence the performance of the particular theme. A theme backed by multiple long-term factors is more likely to perform well than an investment with a short-term trend.
2. Portfolio: Investors must analyse the investment portfolio and its stock selection to understand the degree of dependence or concentration on certain companies or industries. 
3. Expense ratio: Investors must analyse the cost charged for managing and adjusting the fund based on the fund’s investment strategy when comparing different fund options.
4. Align with investment horizon: Since thematic funds may take a long time to develop and grow, investors with a long-term investment horizon can consider these funds. They should avoid thematic funds for short-term goals. 

SIP vs Lump  Sum For Thematic Funds

Investors can choose to invest in thematic funds through both SIPs and Lump sums. Let’s understand which is more suitable for investors.

Basis	SIPs	Lump sum
Meaning	Investing a fixed amount at regular intervals	Investing a large amount of capital at once
Suitable for	These are suitable for beginners and investors with regular incomes	These are best suited for investors with surplus money available
Risk	Relatively lower risk because of rupee cost averaging	Higher Thematic market risk since it is exposed to the market
Returns	Steady returns over time, but might be lower in a steadily rising market	May generate high returns if invested during favourable prices

Direct vs Regular Thematic Funds

Let’s understand the difference between direct and regular thematic funds.

Basis	Direct Thematic Funds	Regular Thematic Funds
Meaning	Directly purchasing from AMCs without any involvement of intermediaries	Purchased through brokerage platforms, banks, or distributors
Returns	Relatively higher returns due to lower cost	Relatively lower returns because of certain fees and charges
Suitable for	Investors comfortable with independent decision-making and investment management	Investors who seek expert guidance
Cost	Low investment cost because of no intermediaries	High cost because it involves distributors and intermediaries

Taxation of Thematic Mutual Funds

Thematic funds primarily invest in the equity stocks of various theme-oriented companies across different sectors and industries. The taxation on capital gains of thematic mutual funds depends on the holding duration of the asset and is measured as per the Income-Tax Act on or after 1st April 2023.

1. Short-term Capital Gain: When the investment is redeemed within less than one year or 12 months, it is considered short-term capital gains and is taxed at 20%. 
2. Long-Term Capital Gain: When the investment is redeemed after 12 months, it is considered long-term capital gains and is taxed at a rate of 12.5% on the total income, with an exemption up to ₹1.25 lakhs.

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