Thematic Mutual Funds

Thematic Mutual Funds target equities on the basis of a common theme or trend. Investable funds are allotted to equities of a particular theme like healthcare, infrastructure, etc. 

This could help diversify a portfolio in a focused and undiluted manner. Moreover, since this mutual fund invests directly into equities, it is well suited for aggressive investors who are looking to capitalise on growth opportunities. If the chosen market theme is a flourishing one, the capital gains can be astounding.

Filter by

Fund Category



Rating by Value Research

Fund Category

Fund Sub-Category


Rating by Value Research


list icon alt list icon
Grid icon grid icon



arrow arrow


What are Thematic Mutual Funds?

When the main focus of a mutual fund scheme is around a particular theme (infrastructure, energy, healthcare, etc, it is termed a thematic mutual fund. Meaning the fund manager of the scheme will invest in the companies across different sectors that focus on the particular theme.


Given the nature of these schemes, they are an excellent option for opportunistic investors who intend to generate wealth by investing in economic trends. An important point to note about thematic mutual funds is that they are equity oriented. This means that the fund manager mainly invests in equities and instruments related to equity.


As per SEBI rules, 80% of the fund allocation of a thematic MF should be equity focused. Given this they are often termed as equity thematic funds and are high-risk and suitable for investors who have a higher risk appetite. 


Additionally, to make the most of your investment, you need to stay invested for a horizon between the mid and long term.

How do Thematic Funds Work?

Thematic mutual fund schemes have an underlying theme that has the potential to grow and amplify in the future. This allows you to earn more from your investment. Moreover, thematic MF schemes have investments that are spread across sectors, diversifying the portfolio and mitigating the risk.


Though the schemes are different from a conventional mutual fund, the workings of the scheme are the same. This means that the fund manager of the particular thematic scheme will invest in companies related to that particular theme.


For example, the fund manager of thematic infrastructure mutual funds will research and assess companies in cement, construction, steel, and other such companies related to infrastructure. 


Once the fund manager allocates the funds, they will create a portfolio, which will dictate the performance of the fund. This means that if the companies that the fund manager invests in perform well, the fund will perform well and vice-versa. 


The fund manager will also review and make decisions about buy, sell, and hold based on the performance. This is a crucial aspect of the fund manager’s role as it has an impact on the return you get on your investment.

Types of Thematic Funds

Thematic MF is a scheme that focuses on a particular theme that has the potential to grow in the future. As a result, the list of thematic mutual funds keeps evolving and there are numerous types of schemes to choose from. 


Some of the most popular and best thematic mutual funds available right now are:

  • Consumption


In this thematic scheme, the fund manager will invest in sectors that are focused on consumption. This includes telecommunication, automobile, consumer goods, durables, and more.

  • ESG


Short for Environmental, Social, and Governance, this underlying theme of this scheme is companies that get evaluated on its ESG factors.

  • Energy


Here the fund manager of the mutual fund will focus on investing in corporations that focus on energy and energy or natural resources related operations.

  • Manufacturing


In this mutual fund scheme, the fund manager will focus on allocating the assets towards companies that deal with manufacturing or production of goods.

  • MNC


The fund manager of this fund or the AMC will create a portfolio that comprises companies (multi-national) listed on the stock exchange.

  • PSU


Short for Public Sector Undertakings, this fund manager will focus on and invest in businesses or establishments run by the government.

Features of Thematic Funds

Here is a look into the features of thematic mutual funds that make a popular choice:

  • Exposure in Different Sectors


These mutual fund schemes have an underlying theme, giving the fund manager an opportunity to invest in different sectors. This diversifies your portfolio by mitigating the risk and helps ensure that you get better returns in the long run.

  • Multiple Options to Choose From


There are numerous types of thematic schemes to choose from, ranging from government owned corporations to organisations that focus on energy. This allows you to tap into the potential of growing trends and maximise your returns.

  • Managed by Professionals


Thematic mutual funds can be complex and require you to have an understanding of the market. However, by relying on fund managers, you can start investing to grow your wealth with ease.

Benefits of Investing in Thematic Funds

By investing in the best thematic mutual funds in India, you can enjoy several benefits that give you the opportunity to grow your corpus. Here’s a look at some of the top benefits you can get:

  • Potential for Inflation Beating Returns


When it comes to investing, high risk undertakings generally result in high returns. As such, despite their high-risk nature, thematic mutual funds can deliver admirable returns. However, you need to stay invested for the long-term to be able to make the most of this benefit.

  • Diversified and High-Powered Portfolio


In order to generate great returns, you should have a diversified portfolio that can help mitigate the risk. While thematic funds help you achieve that, they also give you the opportunity to see some serious gains. This ultimately results in you enjoying above-average returns on your investment.

  • Capitalise on Future Trends


Many themes invested in have potential in the long term. Given this, investing early on can help you capitalise on it when the focus theme booms.

Taxation on Thematic Funds

Given that thematic mutual funds are equity focused, the taxation is like other equity oriented mutual fund schemes. Your earnings get added to your total income and taxable as per the slab rate you fall under.


In addition to this, you will also be liable for capital gains on the return that you earn from your investment. The rate of this taxation depends on the holding period of your investment. 


Short-term gains are when you redeem your units at a higher cost within a year and the taxation depends on the slab rate you fall under. 


Long term gains are those that you get after redeeming your units after a period of year. The taxation for these gains is set at 10%, if they exceed the limit of ₹1 Lakh.

Risks Associated with Thematic Funds

Thematic mutual fund schemes are equity-oriented and as such carry the risks associated with any equity focused mutual funds. However, these funds also have additional risks as the investment takes place in companies across sectors. 


This makes your investment vulnerable to the volatility of an industry or a company. Given this, having a good understanding of the theme and investments is vital.


Mutual funds are inherently subject to market risk, making it vital that you invest after carefully assessing the factors and minimising risk while maximising your returns. Thematic funds in mutual funds are predominantly equity oriented, making them suitable if you have an appetite for risk and can stay invested for the appropriate window.

Moreover, understanding the investment market and the funds is crucial in ensuring that you enter and exit the market at the right time. You also need to monitor your investment in a thematic MF regularly to make the most of your investment.

Frequently Asked Questions About Mutual Funds

What are thematic mutual fund schemes?

Thematic mutual funds in India refer to schemes focused on a particular theme. These funds in this scheme are invested in avenues that align with the main theme of the scheme. For example, the fund manager of a manufacturing thematic fund will invest in companies who focus on manufacturing products, regardless of the sector.

What are the top 5 thematic mutual funds?

What is the difference between sectoral and thematic funds?

Who should invest in thematic mutual funds?


Add to Compare


Clear All

Cancel Icon

Search Mutual Funds & Add to Compare