The past one year was full of ups and downs for the stock market. FIIs selling, US tariff drama, other global events and concerns around central bank interest rates – all led to volatility in the domestic equity market. In such an environment, mutual funds too were impacted, with several key categories witnessing negative to marginal growth in short term – especially in 6 months to 1 year. Thematic/sectoral funds were no exception. If we look at their 12-month performance, except for banking and pharma, all other sub-categories within thematic/sectoral space suffered.
In this write-up, we have picked 5 cheapest (low-expense ratio) thematic funds and look at their performance in the last 3 months to 1 year. All these funds are direct plans and are at least 1-year old. Their short-term returns are reviewed so that investors can understand how these funds performed despite the recent volatility.
Here are five thematic funds with lowest-expense ratio to invest in 2025
#1. Edelweiss Business Cycle Fund
Edelweiss Business Cycle Fund, launched on 29 July 2024, is an open-ended scheme from Edelweiss Mutual Fund. It has assets under management worth Rs 1,872 crore (as on 31 July 2025). The fund comes with a relatively low-expense ratio of 0.42%, making it a cost-efficient option for investors looking to ride different phases of business cycles.
The fund has delivered a 2.43% return in the last 3 months and a strong 12.86% gain over 6 months. However, on a 1-year basis, the fund has slipped into negative territory with a (-)8.91% return, reflecting the challenges it faced during broader market corrections.
#2. SBI Equity Minimum Variance Fund
SBI Equity Minimum Variance Fund was launched on 19 March 2019 and has grown steadily over the years. As of 31 July 2025, the fund manages assets worth Rs 224 crore with an expense ratio of 0.42%.
SBI Equity Minimum Variance Fund – Direct Plan has delivered a 3-month return of 0.59%, a 6-month return of 7.32%, and a 1-year return of -3.92%, reflecting moderate short-term gains but a slight decline over the past year.
#3. Sundaram Business Cycle Fund
Sundaram Business Cycle Fund was launched on 25 June 2024 by Sundaram Mutual Fund. Since its launch, the fund has delivered a return of 9.47%. It is an open-ended fund with a very high-risk profile. The fund has assets under management of Rs 1,789 crore and an expense ratio of 0.43% (as of 31 July 2025).
Sundaram Business Cycle Fund has delivered a 3-month return of 2.37%, a 6-month return of 13.46%, and a 1-year return of 6.84%, showing strong medium-term growth since its launch.
#4. Nippon India Quant Fund
Nippon India Quant Fund was launched on 1 January 2013 by Nippon India Mutual Fund. Since its launch, the fund has delivered a return of 14.15%. It is an open-ended fund with a very high-risk profile, tracking the BSE 200 TRI as its benchmark. The fund has assets under management of Rs 101 crore and an expense ratio of 0.47% (as of 31 July 2025).
Nippon India Quant Fund has delivered a 3-month return of 1.00%, a 6-month return of 12.15%, and a 1-year return of 2.14%, reflecting steady medium-term growth with moderate short-term fluctuations.
#5. Axis India Manufacturing Fund
Axis India Manufacturing Fund was launched on 21 December 2023 by Axis Mutual Fund. Since its launch, the fund has delivered a return of 22.94%. It is an open-ended fund with a very high-risk profile, tracking the Nifty India Manufacturing TRI as its benchmark. The fund has assets under management of ₹5,345 crore and an expense ratio of 0.49% (as of 31 July 2025).
The fund has delivered a 3-month return of 2.32%, a 6-month return of 16.16%, and a 1-year return of -1.67%, reflecting strong medium-term growth but a slight decline over the past year.
(Data source – Value Research)
What are thematic funds and their benefits?
Thematic or sectoral funds bet on specific themes or sectors. Such as manufacturing, infrastructure, technology or consumer sector. If these sectors perform well, investors get better returns. Their biggest advantage is that they capture the momentum of growth sectors.
Risk of investing in thematic funds
The biggest risk of these funds is that if the chosen sector or theme weakens, the entire fund comes under pressure. That is, these funds have less diversification and more concentration. This is why they are considered a high risk – high return category.
Caution for investors
-Investment in thematic funds should be done with a long-term perspective.
-Invest only a small part of your total investment amount in these, because the risk is high.
-Take steps only after understanding the growth prospects of the theme and sector.
-There should be no overlap between different funds, otherwise the portfolio can be very one-sided.
Keep in mind, the returns mentioned here are based on past performance. The performance of mutual funds keeps changing according to the market conditions. That is, the fund which did well earlier, may not necessarily give the same return in future.
Summing up…
If you believe in sector-based growth stories and have the ability to take risks, then these 5 thematic funds can make a place in your portfolio in 2025. But before investing, definitely take your financial needs, risk profile and advisor’s advice.