The thematic mutual funds have emerged as a significant driver of portfolio growth in the Indian market, with several top-tier plans delivering consistent returns by betting on broad economic trends rather than single industries.
Unlike traditional sectoral funds that limit exposure to a lone segment like banking or IT, these thematic vehicles spread their capital across various interconnected sectors to capture the full scope of a specific market narrative.
The recent performance data indicate that funds focusing on commodities, services, and multi-sector opportunities have successfully navigated volatile cycles to post impressive long-term gains.
This report analyses 5 prominent thematic funds that have been selected based on their ability to deliver top-tier returns over a five-year period.
Thematic funds: Investment strategy and mechanics
Thematic mutual funds invest in a defined idea that can span multiple industries. Unlike a sector fund that restricts itself to a single industry such as banking or IT, a thematic fund may allocate across sectors connected to a broader concept such as commodities, services, infrastructure or exports.
These schemes follow a top-down investment approach. The fund manager first identifies a theme expected to benefit from economic, regulatory or demand trends. Stocks are then selected across sectors aligned with that theme. Regulations require at least 80% of assets to be invested in line with the stated theme. Most thematic funds are equity-oriented and include large-cap, midcap and small-cap stocks.
Because they are idea-driven and often concentrated, returns can be strong when the theme performs well, but volatility can also be higher compared to diversified equity funds.
#1: ICICI Prudential Commodities Fund – Direct Plan
The ICICI Prudential Commodities Fund – Direct Plan had a NAV of Rs 50.6200 at the time of writing this report. Assets under management stand at Rs 3,559.92 crore.
The fund has delivered 28.41% over 1 year. Its 3-year CAGR stands at 22.34%. Its 5-year CAGR stands at 25.01%.
The Sharpe ratio is 0.91. The expense ratio is 1.00%. The portfolio turnover ratio is 29%, the lowest among the five funds discussed here.
The scheme allocates 97.56% to equity, 0.06% to debt and 2.38% to cash and cash equivalents. In market capitalisation terms, 42.20% is invested in large caps, 32.05% in mid caps and 25.74% in small caps.
Materials account for 93.1% of the portfolio, followed by Industrials at 3.62%, Energy & Utilities at 0.58% and Consumer Staples at 0.26%. The top 10 stocks account for 59.82% of assets, indicating high concentration. The portfolio P/E ratio is 26.86 and the P/B ratio is 3.02.
The top five holdings are Vedanta at 9.42%, Jindal Steel at 9.24%, JSW Steel at 7.45%, Jindal Stainless at 6.98% and Ambuja Cements at 5.30%.
#2: Franklin India Opportunities Fund – Direct Plan
The Franklin India Opportunities Fund – Direct Plan has a NAV of Rs 282.3370 at the time of writing this report. The fund manages Rs 8,271 crore.
It has delivered 16.92% over 1 year. Its 3-year CAGR stands at 30.57%. Its 5-year CAGR stands at 21.13%.
The Sharpe ratio is 1.44, the highest among the five funds. The expense ratio is 0.58%, the lowest in this comparison. The portfolio turnover ratio is 58%.
Equity exposure is 95.71%, debt 0.3% and cash and cash equivalents 3.99%. Large-caps account for 47.14%, midcaps 16.98% and small-caps 35.88%.
Financials form 22.63% of assets, Industrials 21.99%, Technology 14.79%, Consumer Discretionary 10.59% and Energy & Utilities 10.56%. The top 10 stocks account for 34.56% of assets. The portfolio P/E ratio is 21.40 and the P/B ratio is 2.98.
The top five holdings are Axis Bank at 6.54%, ONGC at 4.28%, SBI at 3.87%, Amphenol (APH) at 3.76% and Reliance Ind at 3.56%.
#3: ICICI Prudential Exports and Services Fund – Direct Plan
The ICICI Prudential Exports and Services Fund – Direct Plan has a NAV of Rs 180.0400 at the time of writing this report. Assets under management total Rs 1,385.51 crore.
The fund has delivered between 9.02% and 13.41% over 1 year. Its 3-year CAGR stands in the range of 19.71% to 20.42%. Its 5-year CAGR stands between 18.11% and 19.06%.
The Sharpe ratio ranges between 1.13 and 1.16. The expense ratio ranges between 1.67% and 1.68%, the highest among the five funds. The portfolio turnover ratio is 104%.
The scheme invests 95.38% in equity and 4.62% in cash and cash equivalents. Large-caps account for 68.40%, midcaps 7.13% and small-caps 24.47%.
Financials account for 36.17% of assets, Technology 15.99%, Energy & Utilities 11.36%, Industrials 10.54% and Healthcare 10.52%. The top 10 holdings make up 45.78% of assets. The portfolio P/E ratio is 24.19 and the P/B ratio is 3.52.
The top five holdings are Infosys at 7.02%, ICICI Bank at 6.10%, HDFC Bank at 6.03%, Reliance Ind at 5.57% and NTPC at 5.27%.
#4: ICICI Prudential India Opportunities Fund – Direct Plan
The ICICI Prudential India Opportunities Fund – Direct Plan has a NAV of Rs 40.7500 at the time of writing this report. With Rs 35,142.92 crore in assets, it is the largest fund in this comparison.
The fund has delivered 17.23% over 1 year. Its 3-year CAGR stands at 24.86%. Its 5-year CAGR stands at 24.22%.
The Sharpe ratio is 1.32. The expense ratio ranges between 0.65% and 0.66%. The turnover ratio is around 64%.
The portfolio holds 92.49% in equity, 0.72% in debt and 6.79% in cash and cash equivalents. Financials account for 29.92%, Technology 12.58%, Industrials 11.34%, Energy & Utilities 11.06% and Consumer Discretionary 9.67%. The top 10 stocks account for 41.18% of assets. The portfolio P/E ratio is 16.48 and the P/B ratio is 2.91.
The top five holdings are ICICI Bank at 5.97%, HDFC Bank at 5.49%, Axis Bank at 4.76%, Larsen & Toubro at 4.10% and Reliance Ind at 3.94%.
#5: Sundaram Services Fund – Direct Plan
The Sundaram Services Fund – Direct Plan has a NAV of Rs 37.4795 at the time of writing this report. The fund manages Rs 4,672.48 crore.
It has delivered 15.64% over 1 year. Its 3-year CAGR stands at 19.64%. Its 5-year cagr stands at 18.07%.
The Sharpe ratio is around 1.03. The expense ratio is 0.67%. The turnover ratio is 105%, the highest in this comparison.
The scheme allocates 95.53% to equity, 0.97% to debt and 3.5% to cash and cash equivalents. Large caps form 53.04% of the portfolio, mid caps 18.49% and small caps 28.47%.
Technology accounts for 24.62% of assets, Financials 24.32%, Industrials 11.86%, Consumer Discretionary 9.25% and Healthcare 5.82%. The top 10 holdings represent 42.23% of assets. The portfolio P/E ratio is 25.87 and the P/B ratio is 3.16.
The top five holdings are Bharti Airtel at 6.62%, HDFC Bank at 6.53%, Axis Bank at 5.30%, Adani Ports at 3.31% and Shriram Finance at 3.10%.
Who these funds may suit
Thematic funds may suit those with a long investment horizon who are comfortable with equity market volatility and concentration risk. Since these schemes are built around specific ideas, performance can be cyclical and linked closely to sector trends.
Funds such as ICICI Prudential Commodities Fund, with high concentration in materials, may appeal to those with conviction in commodity-linked businesses. Franklin India Opportunities Fund and ICICI Prudential India Opportunities Fund offer broader sector exposure within their themes and may suit those seeking relatively diversified thematic participation.
Schemes with higher turnover and expense ratios, such as ICICI Prudential Exports and Services Fund and Sundaram Services Fund, reflect more active management styles and may experience greater performance swings.
Allocations to thematic funds are typically considered as part of a broader equity portfolio rather than as a standalone core holding. Return history, cost structure, portfolio concentration and risk profile should all be evaluated before taking exposure to any single theme.
Investor’s takeaway
The numbers show that thematic funds can generate strong multi-year growth when their chosen theme remains in favour. However, performance dispersion, cost structures and portfolio intensity vary sharply across schemes.
These funds are better approached with a long holding period and a clear understanding of the underlying theme. Position sizing matters. Allocating a limited portion of an equity portfolio to a thematic strategy, while keeping core exposure diversified, can help balance opportunity with risk.