The last six months have been quite turbulent for the equity markets, and mutual fund investors have felt that heat too. A host of factors — ranging from geopolitical tensions to rising inflation and concerns about slowing economic growth — kept markets on edge. Adding to the investor woes, the US tariffs targeting India and other major economies rattled stock markets recently. The Indian equity benchmarks – Sensex and Nifty – have dropped around 3% so far this month, while broader indices like the Smallcap 250 and Midcap 150 have taken an even bigger hit.
With so much uncertainty, mutual funds across the board have struggled to deliver returns. Over the past three and six months, most categories have been in the red. Even we look at one-year performance, the story isn’t much different. Barring a few in sectoral/thematic funds such as pharma, consumption & banking, and also international funds, all other categories have suffered. Nowadays many investors are turning to those mutual funds which focus on a particular sector or theme. These funds are called sectoral or thematic funds.
Interestingly, some of the sectoral and thematic sub-categories have shown strong and steady growth over the last three and five years as well.
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In this article, we’re diving into the five best-performing sectoral funds based on their five-year track record. But we won’t stop there —since the market had just bounced back from the Covid crash five years ago, we’re also including their three-year returns to give a clearer picture. So, if you’re looking to understand which funds have stood the test of time, read on.
Among all mutual fund categories, Sectoral–Infrastructure and Thematic–PSU funds have clearly stood out, delivering the highest average returns of 32.53% and 31.65%, respectively. Infrastructure funds, in particular, have led the pack within the sectoral/thematic space. Their strong performance is evident when you look at the 23 schemes in this category—many of which have consistently delivered impressive returns.
Over the last three years, infrastructure funds have posted returns ranging from over 13% to 26%. Stretching the horizon to five years, the returns are even better — between 25% and 41%. What’s more, when we look at the top-performing funds across all sectoral and thematic categories, four out of the top five are infrastructure-focused schemes. That speaks volumes about the strength and consistency of this segment.
Also read: What are sectoral mutual funds? Should you invest in them in 2025?
Here are the top 5 sectoral/thematic mutual funds based on their five-year returns. We’ve also included their three-year performance to give you a clearer picture of how these funds have fared over time and to help you make a more informed long-term comparison.
1. Quant Infrastructure Fund
5-year return: 41.09%
3-year return: 14.98%
2. ICICI Prudential Commodities Fund
5-year return: 39.06%
3-year return: 11.65%
3. ICICI Prudential Infrastructure Fund
5-year return: 38.25%
3-year return: 25.58%
4. Bandhan Infrastructure Fund
5-year return: 37.04%
3-year return: 23.03%
5. HDFC Infrastructure Fund
5-year return: 36%
3-year return: 26.39%
(Source: AMFI)
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Why are sectoral funds being liked
According to AMFI, currently there are about 210 such funds in the market. These funds based on sectors like infrastructure, PSU companies, pharma, banking and consumption have given good returns in the last few years, due to which people’s interest in them has increased. Especially when there is a boom in a sector, these funds perform much better than other funds-and this is what makes them special.
There is also risk, but invest wisely
Although there is a possibility of profit in these funds, there is also risk associated with them. The reason is that they are based on only one sector-if there is a decline in that sector, then there can be a loss. Therefore, these funds are not for everyone. If you understand the market a bit, have a long-term perspective and are willing to take a little risk, these can be a good top-up to your portfolio. But it is important to think carefully before investing.
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.