In May 2025, with a 22.5% year-on-year increase, the Indian mutual fund industry grew to ₹72.2 lakh crores in assets under management. The growth is a testament to heightened investor participation. Given the diverse population of India, it is safe to assume a diverse investor group with distinct needs and aspirations.
Therefore, while some investors prioritise capital preservation, others might prioritise capital appreciation. In such a scenario, a unique mutual fund category, called thematic mutual funds, offers an opportunity for focused portfolio growth. Therefore, this blog strives to shed light on the best thematic mutual funds.
What are thematic mutual funds?
Mutual funds that focus their asset allocation on specific trends, sectors and market themes are called thematic mutual funds. Rather than diversifying across sectors or themes, these mutual funds aim to derive gains by investing in particular sectors or themes. There are two categories of such mutual funds.
- Sectoral funds: These mutual funds invest in assets belonging to particular industries or sectors. For instance, an automobile mutual fund will primarily hold automobile stocks.
- Thematic funds: Not all thematic funds are driven by a focus on a particular sector. Some thematic funds focus on themes such as digitisation, renewable energy, etc. In such a scenario, such funds might diversify across sectors. For instance, a thematic mutual fund focusing on exports can invest in company stocks across sectors like FMCG, automobile, etc., that have high export income.
Also read: Beyond stocks: Can mutual funds invest in options and futures
Top 5 thematic mutual funds based on trends
The table below shows the top 5 thematic mutual funds that create their asset portfolio based on themes. They are listed based on their AUM as of 26 June 2025.
| Particulars | ICICI Prudential India Opportunities Fund Direct Plan Growth | ICICI Prudential Business Cycle Fund Direct Plan Growth | SBI Innovative Opportunities Fund Direct Plan Growth | Franklin India Opportunities Fund Direct Growth | ICICI Prudential Innovation Fund Direct Plan Growth |
| AUM (₹ crores) | 28,204.24 | 12,972.09 | 7,367.42 | 6,863.66 | 6,793.71 |
| Expense ratio | 0.63 | 0.72 | 0.61 | 0.50 | 0.69 |
| Fund Risk | Very high | Very high | Very high | Very high | Very high |
| PE Ratio | 21.95 | 24.44 | 44.66 | 28.83 | 29.67 |
| Sharpe Ratio | 1.52% | 1.30% | – | 1.50% | – |
| Standard Deviation | 12.33% | 12.99% | – | 16.43% | – |
| Sortino | 3.00% | 2.72% | – | 2.12% | – |
| Rolling return (Average 1 year % rolled daily) | 28.86% | 23.28% | – | 22.62% | 36.56% |
The following are the key takeaways from the top 5 thematic mutual funds of 2025.
- ICICI Prudential India Opportunities Fund Direct Plan Growth: It has the largest AUM, indicating investor confidence. Among the top 5 thematic mutual funds, it has the highest Sortino ratio, indicating effective downside risk management. Moreover, both Sharpe and Sortino are higher than the category average of 0.79 and 1.26, respectively, recorded by BSE 500 TRI.
- ICICI Prudential Business Cycle Fund Direct Plan Growth: The fund has the second-highest Sortino and third-highest rolling return, indicating a median risk and return balance. Most risk-adjusted ratios are below their peers, which might reflect less efficiency of return at a given risk. Moreover, it has the highest expense ratio among its peers, causing a diminished return for investors.
- SBI Innovative Opportunities Fund Direct Plan Growth: Although it is the third-largest thematic fund, investing based on a theme, most of its records are unavailable. It is because the fund was established on 20 August 2024, resulting in a lack of annualised records. However, in the 3 months ending 25 June 2025, the fund has given a return of 8.98%, compared to a Nifty 500 benchmark return of 9.50%.
- Franklin India Opportunities Fund Direct Growth: The fund stands out for its low expense ratio. However, the highest standard deviation indicates high volatility. Moreover, the risk-adjusted ratios remain moderate.
- ICICI Prudential Innovation Fund Direct Plan Growth: The fund was established on 28 April 2023. Therefore, even though we can calculate the one-year return, we cannot calculate the risk-adjusted ratios because such ratios are calculated based on three-year data.
Moreover, all the top 5 thematic mutual funds have a very high-risk rating. High risk is consistent across thematic and sectoral mutual funds because at least 80% of their portfolio is focused on a particular sector or theme according to the SEBI categorisation, making them susceptible to greater risk.
Also read: Understanding a Mutual Fund Overlap Portfolio
Best sectoral thematic funds in various sectors
Irrespective of risk, the growing Indian economy has often inspired an analytical and healthy investment attitude. Therefore, this section covers some of the best sectoral thematic funds in India based on their AUM as of 26 June 2025.
| Name | AUM(₹ Crores) | Sharpe ratio (%) | Sortino ratio(%) | Standard deviation(%) | Rolling return (Average 1 year % rolled daily) (%) |
| Best thematic funds in Technology | |||||
| ICICI Prudential Technology Direct | 13,899.97 | 0.49 | 0.84 | 16.64 | 23.83 |
| TATA Digital India Direct | 11,688.32 | 0.54 | 0.95 | 17.47 | 26.56 |
| Category average(3 years) | – | 0.4912 | 0.7994 | 17.3482 | – |
| Best thematic funds in infrastructure | |||||
| ICICI Prudential Infrastructure direct | 7,920.29 | 1.55 | 2.44 | 15.32 | 23.21% |
| Nippon India Power and Infra Direct | 7,416.88 | 1.31 | 1.75 | 18.90 | – |
| Category average (3 years) | 1.1274 | 1.9560 | 17.8484 | ||
| Best thematic funds in energy | |||||
| ICICI Prudential Energy Opportunities direct | 10,558.53 | – | – | – | – |
| SBI Energy opportunities direct | 10,450.59 | – | – | – | – |
| Best thematic funds in pharmaceuticals | |||||
| Nippon India Pharma Direct | 8,352.16 | 1.14 | 1.74 | 14.97 | 21.50% |
| Category average (3 years) | – | 1.0027 | 1.9729 | 16.1740 | – |
Also read: What is Systematic Withdrawal Plan (SWP) in Mutual Fund
Bottomline
Thematic mutual funds invest in particular sectors and themes. At least 80% of their asset portfolio is invested in a particular sector or theme. Due to intense investment focus, diversification is minimised, resulting in high risk and return. There have been multiple new thematic fund entries in the market. Moreover, categories like energy are novel as a whole.
Therefore, intense research and scrutiny are necessary before investing in these sectors. Moreover, investors must thoroughly analyse their individual investing goals and risk appetite. Understanding of macro trends of a particular sector helps choose the best thematic mutual fund.
FAQs
The term thematic mutual funds refers to mutual funds that concentrate their asset allocation on particular market topics, industries, and trends. These mutual funds seek to make money by investing in certain industries or themes rather than spreading across them. These mutual funds fall into two groups. It maintains a focused approach to investing, resulting in high risk and return.
Sectoral mutual funds make investments in assets associated with certain sectors or industries. Focusing on a certain industry is not the driving force for all thematic funds. Certain thematic funds concentrate on topics like renewable energy, digitisation, etc. Such funds may diversify across industries in such a situation. For example, an export-focused thematic mutual fund may invest in stocks of companies in industries with significant export revenue, such as FMCG, autos, etc.
Thematic mutual funds make investments in certain industries and topics. A certain industry or topic accounts for at least 80% of their asset portfolio. Diversification is reduced as a result of the concentrated investing, which raises risk and return. The market has seen many new theme fund entrants. Furthermore, as a whole, categories like energy are relatively new.
