Since last Diwali, the market has faced its share of turbulence.
The Nifty 50 delivered flat returns over the past year, while the broader market is yet to turn positive, testing investor patience.
Yet, even amid this challenging environment, some sectors managed to outperform. Undoubtedly, the story is no different with mutual funds.
While broad-market indices struggled, certain sector-focused funds managed to cut through the noise, delivering notable returns.
These funds, focused on high-performing sectors, have outperformed since last Diwali, proving that theme-driven strategies can deliver even when the broader market lags.
Let’s take a closer look at five such funds that have outperformed the market…
#1 DSP Banking & Financial Services Fund
DSP Banking and Financial Services Fund was launched on 8 December 2023. It is an open-ended thematic equity scheme with assets under management (AUM) of Rs 14.2 bn.
The scheme has delivered a return of 15.52% from 31 October 2024 to 14 October 2025 (to date).
The scheme seeks to generate returns through investment in both domestic and overseas equity and equity-related securities of companies engaged in the banking and financial services sector.
As per SEBI regulations, sectoral and thematic funds are required to invest a minimum of 80% of their AUM in stocks that align with their specific theme.
Accordingly, the current portfolio allocation of the scheme is 35.2% in finance, 35.1% in banks, capital markets (9.9%), insurance (8.5%), fintech (0.5%), and IT services (0.5%).
The scheme holds 26 stocks, with the top 10 holdings accounting for 63.5% of the portfolio. Its top five holdings include ICICI Bank (14.02%), Bajaj Finserv (9.29%), SBI (6.91%), Axis Bank (6.53%), and Cholamandalam Investments (5.8%).
The portfolio turnover ratio of this fund is on the higher side at 68%. The expense ratio of this scheme (direct plan) is 0.67%, and the exit load is 0.5% if redeemed within a month.
The scheme has outperformed with slightly higher volatility, with a standard deviation of 13.57, compared to Nifty Financial Services TRI (13.14).
The scheme also mitigates the downside risk well, as indicated by the Sortino ratio of 0.61, which is a little higher than the Nifty Financial Services TRI (0.50).
It also outperforms on risk-adjusted returns with a Sharpe ratio of 0.27, versus the benchmark (0.23).
#2 ICICI Pru Transportation and Logistics Fund
ICICI Pru Transportation and Logistics Fund was launched on 28 October 2022. It’s an open-ended thematic equity scheme with AUM of Rs 30.14 bn.
The scheme has delivered a return of 15.6% from 31 October 2024 to date.
The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of companies engaged in the transportation and logistics sectors.
The current portfolio allocation of the scheme is 71.54% in consumer discretionary, industrials (15.62%), technology (8.1%), and materials (0.02%).
The scheme holds 41 stocks, with the top 10 holdings accounting for 69.29% of the portfolio. Its top five holdings include M&M (13.98%), TVS Motor (9.02%), Maruti Suzuki (8.96%), Eternal (8.1%), and Tata Motors Passenger Vehicles (8.03%).
Portfolio churn is moderate, as indicated by a portfolio turnover ratio of 42%. Its expense ratio (direct plan) is higher at 1.04%, and the exit load is 1% if redeemed within a month.
The scheme has outperformed with lower volatility, with a standard deviation of 14.9, compared to Nifty Transport and Logistics TRI (16.52).
The scheme also mitigates the downside risk well, as indicated by the Sortino ratio of 0.87, which is a little higher than the Nifty Transport and Logistics TRI (0.81).
It also outperforms on risk-adjusted returns with a Sharpe ratio of 0.45, versus the benchmark (0.41).
#3 UTI Transportation & Logistics Fund
UTI Transportation & Logistics Fund is an old scheme that was launched on 7 April 2004. It’s an open-ended thematic equity scheme with AUM of Rs 39.68 bn.
The scheme has delivered a return of 16.38% from 31 October 2024 to date.
The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of companies engaged in the transportation and logistics sectors.
The current portfolio allocation of the scheme is 67.69% in consumer discretionary, industrials (19.01%), and technology (7.18%).
The scheme holds 38 stocks, with the top 10 holdings accounting for 66.45% of the portfolio. Its top five holdings include M&M (13.61%), Maruti Suzuki (10.67%), Eicher Motors (9.79%), Eternal (6.62%), and Interglobe Aviation (5.47%).
Portfolio churn is low, as indicated by a portfolio turnover ratio of 19%. Its expense ratio (direct plan) is 0.82%, and the exit load is 1% if redeemed within a month.
Its standard deviation is 15.59, which is lower than the benchmark (16.52), indicating that the scheme portfolio has low volatility.
It’s also not efficient in managing downside risk, as indicated by the Sortino ratio of 0.72, which is a little lower than the Nifty Transport and Logistics TRI (0.81).
It also underperforms on risk-adjusted returns with a Sharpe ratio (0.36), versus the benchmark (0.41).
#4 HDFC Defence Fund
HDFC Defense Fund is a new scheme, launched on 2 June 2023. It’s an open-ended thematic equity scheme with AUM of Rs 70.24 bn.
The scheme has delivered a return of 17.45% from 31 October 2024 to date.
The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of Defense & allied sector companies.
Its current portfolio allocation is 66.6% in industrials, materials (15.36%), consumer discretionary (10.83%), and technology (5.74%).
The scheme holds 24 stocks, with the top 10 holdings accounting for 85.13% of the portfolio. Its top five holdings include Bharat Electronics (18.88%), Hindustan Aeronautics (15.21%), Solar Industries (11.67%), Bharat Forge (9.58%), and BEML (8.83%).
The scheme believes in a buy-and-hold strategy as indicated by a portfolio turnover ratio of 14.8%. The scheme expense ratio (direct plan) is 0.75%, and the exit load is 1% if redeemed within a month.
Its standard deviation is 30.07, which is lower than the benchmark (33.45), indicating that the scheme portfolio has low volatility.
The scheme is also not efficient in managing downside risk, as indicated by the Sortino ratio of 0.86, which is lower than the benchmark (1.04).
It also underperforms on risk-adjusted returns with a Sharpe ratio (0.39), versus the benchmark (0.42).
#5 HDFC Transportation and Logistics Fund
HDFC Transportation and Logistics Fund is a new fund that was launched on 17 August 2023. It’s an open-ended thematic equity scheme with AUM of Rs 16.52 bn.
The scheme has delivered a return of 20.6% from 31 October 2024 to date.
The scheme seeks to generate long-term capital appreciation by investing predominantly in equity and equity-related securities of companies engaged in the transportation and logistics sectors.
The current portfolio allocation of the scheme is 82.4% in consumer discretionary, industrials (13.52%), technology (2.96%), and energy and utilities (0.68%).
The scheme holds 33 stocks, with the top 10 holdings accounting for 63.97% of the portfolio. Its top five holdings include Maruti Suzuki (10.82%), Eicher Motors (9.72%), Hyundai Motor (7.82%), Bosch (6.93%), and Hero MotoCorp (5.96%).
The portfolio shows moderate activity, with a turnover ratio of 31.33% indicating average churn. Its expense ratio (direct plan) is 0.94%, and the exit load is 1% if redeemed within a month.
Its standard deviation is 16.83, which is higher than the benchmark (16.52), indicating that the scheme portfolio comes with higher volatility.
But it manages the downside risk well, as indicated by the Sortino ratio of 0.86, which is a little higher than the Nifty Transport and Logistics TRI (0.81).
It also performs better on risk-adjusted returns with a Sharpe ratio (0.45), versus the benchmark (0.41).
Thematic Mutual Fund Schemes Return
Conclusion
The past year highlighted that broad markets could remain stagnant even as pockets of opportunity emerge.
These sector-focused mutual funds demonstrated how theme-driven strategies can deliver meaningful returns despite volatility.
For investors willing to embrace concentration and sectoral conviction, these funds could offer a way to capture high-growth themes.
However, sectoral funds are inherently high-risk, and most of these schemes, except the UTI Transportation & Logistics Fund, have no long-term performance track record.
Investors should therefore have a high risk tolerance before considering any of these funds.
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