The Indian government has signed off on a major leap into semiconductor production, with proposals to introduce its first locally made cutting-edge chips in the next few years.
This is a watershed moment, as the nation swings from being a consumer of semiconductors to also being an active player in the global supply chain.
With policy support under the ‘Make in India’ initiative and the Semicon India programme, and growing demand from industries such as AI, EVs, 5G, and smart devices, India’s semiconductor story is quickly taking the shape of a sunrise opportunity for investors.
India’s Semiconductor Ecosystem
India’s semiconductor industry is nascent, but is growing fast.
• Manufacturing: Leading international and local companies are investing in chip fabrication facilities and assembly houses, which indicates faith in India’s long-term opportunity.
• Design and R&D: India’s IT talent is being used to create world-class chip designs, lessening reliance on imports and improving the domestic value chain.
• Policy and Incentives: Programs such as the India Semiconductor Mission are driving infrastructure creation, talent development, and research innovation.
In a major milestone for India’s semiconductor sector, the Indian Institute of Technology Madras and ISRO have collaboratively designed and developed an indigenously developed semiconductor chip—the RISC–V Controller for Space Applications (IRIS).
This indicates a robust homegrown R&D competence and emerging prospects in space–tech hardware.
India’s semiconductor industry, worth around US$ 38 billion (bn) in 2023, is expected to grow to US$ 45–50 bn by the end of 2025 and US$ 100–110 bn by 2030, as per a recent government press release quoted by The Economic Times.
These developments together indicate an industry set to grow in the long run. Direct investment in Indian semiconductor companies is however restricted and this is where mutual funds prove to be a great investing vehicle.
We have listed the top 3 mutual funds on the basis of 5 year CAGR, with high allocation to semiconductor stocks.
(Source: ACE MF)
#1 Motilal Oswal Flexi Cap Fund
Motilal Oswal Flexi Cap Fund is not a thematic fund but a diversified scheme permitting dynamic allocation between market caps and sectors.
It was launched in April 2014 with an AUM of close to Rs 136.8 bn as of August 2025. This fund is based on a bottom-up stock-picking philosophy anchored in the QGLP (Quality, Growth, Longevity, and Price) philosophy.
The portfolio is diversified, with largecaps constituting about 44.3% of the assets, midcaps 49.8%, and smallcaps 1.4%.
The mandate is flexible enough to leverage several themes, such as infrastructure, manufacturing, and consumption, based on the way the market is behaving.
During the last 5 years, the fund has returned a CAGR of 29%+, highlighting consistency in performance through market cycles.
The total exposure in semiconductor stocks is 17.52% with the highest allocation in Dixon Technologies (9.76%), CG Power & Industrial Solutions (6.34%) and Kaynes Technology (1.42%).
Its sectoral distribution consists of technology (20.89%), retailing (17.71%), and capital goods (12.51%).
The emphasis on quality growth stocks lends stability, and the flexicap structure enables the fund to leverage opportunities in high-growth sectors.
#2 Canara Robeco Infrastructure Fund
The Fund is one of the leading thematic schemes. It focuses on India’s developing infrastructure story.
Launched in September 2005, the fund has an AUM of Rs 8.89 bn (as of August 2025). The portfolio is tilted towards largecap stocks (almost 54.3%) but has exposure to midcaps (30.1%) and smallcaps (11.34%) as well.
The fund adopts a growth style that seeks to capture India’s infrastructure growth momentum while remaining diversified across sub-segments.
In the last five years, it has given returns of 31.9% CAGR, which is among the better-performing semiconductor-heavy allocation-based mutual funds.
Its holding in semiconductor stocks amounts to 12.3% of its AUM with the highest allocations in Bharat Electronics (3.61%), Dixon Technologies (3.56%), CG Power & Industrial Solutions (2.99%), and Kaynes Technology (2.14%).
Its sectoral exposure is in capital goods (24.23%), power (11.4%), and infrastructure (9.14%).
The strategy is aggressive in terms of sector positioning but controlled in stock selection.
#3 HSBC Infrastructure Fund
HSBC Infrastructure Fund has established a niche position by offering a play on India’s increasing capital expenditure and urban development plans.
The scheme, which was launched in January 2008, manages an AUM of about Rs 227.8 m as of August 2025.
Its portfolio is diversified across largecaps (55.34%) and smallcaps (30.71%), with some allocation to midcaps (11.71%) that have the potential to emerge as future leaders.
The investment approach focuses on spotting firms with robust order books, execution prowess, and financial health.
From the perspective of performance, the fund has recorded a positive 10-year CAGR of 17.1%, whereas its 5-year CAGR is 29.3%, delivering well above its benchmark in infra upcycle periods.
The total exposure to semiconductor stocks is 10.6%. It’s top holdings are in Bharat Electronics at 7.97% and Dixon Technologies at 2.62%.
The sector tilt is in favour of capital goods (32.07%), infrastructure (12.9%), and power (8.94%), with selective bets in utilities.
The fairly diversified strategy of the fund ensures that it does not only invest in headline infrastructure projects but also in complementary industries that are likely to gain from India’s long-term growth.
Conclusion
For investors, the semiconductor sector represents future of technology-led growth.
Unlike cyclic themes, which rely on short -term triggers, semiconductor industries are deeply associated with structural changes.
India’s growing role in this place supported by government incentives and private capital flows shows that the opportunity can continuously expand over time.
Mutual funds provide an efficient way to invest in this industry, enabling investors to invest in firms along the semiconductor value chain without having to select individual stocks.
The expert management, diversification, and long-term mindset of these funds make them an interesting proposition for those looking to tap India’s semiconductor growth opportunity with prudent risk-taking.
Table Note: Data as of September 16, 2025
The securities quoted are for illustration only and are not recommendatory
Past performance is not an indicator for future returns.
Returns are on a rolling basis and in %. Direct Plan-Growth option.
Those depicted over 1-Yr are compounded annualised.
Risk ratios are calculated over a 3-year period assuming a risk-free rate of 6% p.a.
Happy investing.
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