Best Thematic Mutual Funds to Consider Investing in India

The landscape for investing in mutual funds has changed considerably since the days of only considering diversification in equity and debt funds. Nowadays, investors wish to narrow their opportunities and focus on funds that target specific sectors, megatrends, or social themes. Here, thematic mutual funds fill the gap. 

This article examines thematic funds meaning, theme-based investing, the best thematic funds in India, and a list of thematic funds worth considering for your long-term portfolio. 

 

What Are Thematic Mutual Funds?

Thematic mutual funds, or mutual funds based on themes, target funds that buy equity stakes in companies that relate to a specific theme or idea. These funds do not narrow their focus to one sector of the economy, but they still invest in a cross section of various sectors of the economy that relate to the same theme.

e.g, financial, telecom, IT and e-commerce companies could benefit from a Digital India theme. 

 

Best Thematic Funds 2025

 Investing in mutual funds based on access and strong fund themes should perform well despite poor historical returns. Here is a list of best thematic mutual funds for investing based on performance, reliability, and strong themes:

 

1. ICICI Prudential Technology Fund:

 Focus on the digital economy, AI, and automation - for those optimistic on India’s IT leadership.

 

2. Tata Infrastructure Fund:

 The infrastructure, energy, and logistics sectors are benefiting from the government's infrastructure.

 

3. SBI Consumption Opportunities Fund:

 Focus on the long-term expansion of demand driven by the middle class.

 

4. Kotak ESG Opportunities Fund:

 Best for investors focusing on ESG and sustainability.

 

5. Nippon India Power & Infra Fund:

 Understands India’s Growth Cycle in Power Transition and Capital Expenditure.

 

These best thematic funds are all about investing in different structural growth stories that are shaping India’s economy.

Thematic Funds vs Sector Funds

Thematic mutual funds and sector funds are similar but differ in some aspects.

 

Feature	Thematic Funds	Sector Funds
Investment Focus	Based on a broad theme involving multiple sectors (e.g., consumption, digital, energy).	Invests only in one sector (e.g., banking, pharma, IT).
Diversification	Broader, across industries linked to the theme.	Concentrated in a single sector.
Risk Level	Moderate to high.	High, due to lack of diversification.
Example	ICICI Pru Technology Fund (theme: digital transformation).	Nippon India Pharma Fund (sector: healthcare).

Thematic mutual funds are a balanced mix of focused investing and risk diversification within a broader theme.

 

Thematic Funds in India (2025)

 

Here’s a list of thematic funds that have done well and show a wide range of opportunities within their themes.

 

Fund Name	Theme	*1-Year Return (%)	*5-Year CAGR (%)
ICICI Prudential Technology Fund	Digital Transformation	43.2	25.8
Tata Infrastructure Fund	Infrastructure & Development	47.6	22.1
SBI Consumption Opportunities Fund	Consumer Spending	39.5	19.3
Aditya Birla Sun Life Digital India Fund	IT & Internet	41.0	23.6
Kotak ESG Opportunities Fund	Sustainability & ESG	32.2	16.5
Nippon India Power & Infra Fund	Power & Capital Goods	50.8	21.9
Quant Manufacturing Fund	Industrial Growth	38.1	— (New Fund)

(Source: AMFI, Value Research – Data as of October 2025)

 

Core Concept of Theme-Based Investing

The underlying principle of thematic funds is theme-based investing. It consists of recognising long-term structural trends that are likely to impact business growth for the next decade.

Examples of popular investing themes include:

1.  Digital India and Technology

2.  ESG and Renewable Energy

3.  Urbanisation and Consumption

4.  Infrastructure Development

5.  Innovation in Healthcare.

 

These are impacted by changes in lifestyle, policies, and macroeconomic conditions. Investors that are optimistic about these trends' long-term prospects will employ theme-based investing to take advantage of the opportunity as soon as possible.

 

Thematic Mutual Funds' Charged Identity

 

1. Focused Investment

Thematic-focused funds concentrate on a limited number of companies within a particular sector.

 

2. Investment Horizon

These funds are intended for long-term investors, as themes will open and eventually play out for years, or even decades.

 

3. Theme-Based Diversification

Unlike sector funds, thematic funds spread risk across several industries while focusing on the central premise of a single idea.

 

4. Active Management

Fund managers keep track of macroeconomics and company events within the theme.

 

5. Higher Risk and Higher Return Potential

Themes, and thus returns, can be cyclical, but the potential upsides far outweigh those of regular funds.

Who Should Invest in Thematic Mutual Funds?

Theme based investing is ideal for investors who:

• Have high risk tolerance and understand sectoral dynamics.

• Believe in long-term structural trends (e.g. renewable energy, digitising).

• Want to diversify beyond traditional equity funds. 

• Can hold investments for at least 3-5 years.

Thematic funds can also be an option for beginners and can be a small allocation (10-20%) to their equity portfolio.

 

Benefits of Investing in Thematic Funds

• High Growth Potential. Aligned to powerful macro trends.

• Diversified Exposure. Invests across various sectors within any one theme.

• Professional Management. Fund managers strategically pursue identifiers.

• Advance Early Entry. Investors can capture emerging trend’s early momentum.

 

Risks of Thematic Mutual Funds

Higher Volatility - Fluctuates with the popularity of themes.

Concentration Risk - Limited to sectors tied to that one theme.

Economic Cycle - The economic cycle governs which themes do well and which do not.

Timing and Patience - It takes time for a theme to play out fully, sometimes years.

 

How to Choose the Right Thematic Mutual Fund

1. Pick a theme that fits with the long-term megatrends such as EVs or AI.

2. Look for funds that have consistently performed for a minimum of 3-5 years.

3. Active management is essential, and how they manage the funds past and present is key.

4. The lower the expenses, the better the long-term compounding.

5. Ensure you are not holding multiple funds with the same or similar themes. 

 

 

Conclusion

Thematic mutual funds bring together growth, innovation, and diversification. They give the investor the opportunity to take part in long-term revolutionary developments. Additionally, they are riskier than diversified equity funds, but for astute investors, the possible return justifies the risk. If you choose the best themed funds, you might be at the forefront of megatrends like renewable energy and India's digital development.

Discover the best low-risk choices for steady and reliable profits by looking through our guide on Top Performing Debt Mutual Funds.

 

DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.