Best Sectoral Mutual Funds in India 2026: Top 10 & Guide
What Sectoral mutual funds are, who should invest, key risks, and the top 10 funds with returns and risk data.
Sectoral mutual funds invest in companies from one particular sector, so their results depend heavily on how that industry performs. They can beat the market in a favourable cycle but are highly volatile. This guide covers who should invest, benefits, risks, and the top 10 sectoral and thematic funds from our data.
Key takeaways
- Sectoral funds are equity funds that invest across market capitalisations within one specific industry.
- They can deliver benchmark-beating returns when the sector is favoured, but they are highly volatile.
- They lack sector diversification, so they are among the riskier mutual funds.
- They suit high-risk, experienced investors with a horizon of at least five years; exposure should be limited.
- The top 10 funds below are ranked by an internal score, with return and risk numbers shown.
What are sectoral mutual funds?
As the name suggests, sectoral funds invest in a particular sector. They are equity funds that invest across market capitalisations of a specific industry that is expected to grow. They can offer returns that beat the benchmark in a bull market that favours the sector, but their high volatility can also turn results upside down.
Who should invest in sectoral mutual funds?
- High-risk-appetite investors: the lack of diversification makes them one of the riskiest fund types.
- Active, expert investors: first-time investors should avoid them. They need precise entry and exit timing and extensive industry study.
- Tactical allocators: some sectors, such as auto, are cyclical, and an informed investor may buy near the bottom of a cycle and sell near the peak.
What should you consider before investing?
- Investment goals: plan on a horizon of at least five years, because a sector takes time to reach its peak.
- Limit your exposure: given the high risk, keep these funds to a limited share of your portfolio.
- Concentration: these are concentrated investments that do not diversify across sectors, and the less diversified a fund, the higher the risk.
- Expense ratio: fees reduce your actual returns.
Advantages of sectoral mutual funds
- High return potential if you pick the right sector, since each sector moves in cycles.
- Market-cap diversification within the sector: stocks of companies of all sizes in that sector are held.
- Long-term goals: over a long period they can help meet milestones such as marriage, a child's needs or retirement.
- Two ways to invest: a lump sum or a SIP.
Risks of sectoral mutual funds
- Limited diversification: if the sector takes a hit, the investment can drop.
- Cyclicality: sectors such as infrastructure and healthcare are heavily affected by economic cycles and market trends.
- High risk: performance rests entirely on the sector, so a downturn can hurt the whole fund.
- Timing: entry and exit timing matters a great deal for above-average returns.
How are Sectoral mutual funds taxed?
Gains from Sectoral funds are subject to capital gains tax as equity mutual funds. The rates and holding-period rules depend on the fund type and can change, so check the current rules or speak to a tax advisor before you invest.
Top 10 Sectoral mutual funds ranked by an internal score
These are the top 10 Sectoral funds from our data, ranked by Invo Wealth's internal fund-quality score. The score itself is not shown, only the return and risk numbers behind it. A "--" means the fund has not completed that period or the data is unavailable.
Returns across 6 months to 5 years
Performance data as of 5 September 2026.
| Fund | 6M CAGR | 1Y CAGR | 3Y CAGR | 5Y CAGR |
|---|---|---|---|---|
| ICICI Prudential Infrastructure Fund | 16.59% | 6.69% | 17.69% | 21.87% |
| DSP India T.I.G.E.R. Fund | 27.61% | 16.47% | 19.16% | 20.87% |
| LIC MF Infrastructure Fund | 25.47% | 13.40% | 22.51% | 20.80% |
| SBI PSU FUND | -10.53% | 10.91% | 20.01% | 22.58% |
| SBI HEALTHCARE OPPORTUNITIES FUND | 46.41% | 20.02% | 23.00% | 17.10% |
| BANK OF INDIA MANUFACTURING & INFRASTRUCTURE FUND | 31.68% | 18.56% | 20.47% | 19.69% |
| Franklin India Opportunities Fund | 16.97% | 4.25% | 19.64% | 17.69% |
| Canara Robeco Infrastructure Fund | 5.84% | 5.01% | 18.75% | 18.20% |
| ICICI Prudential Exports & Services Fund | 15.27% | 6.18% | 15.05% | 14.09% |
| Aditya Birla Sun Life PSU Equity Fund | -3.40% | 14.40% | 19.54% | 22.29% |
Risk and consistency metrics
| Fund | ISIN | Volatility | Max drawdown (3Y) | Sortino ratio |
|---|---|---|---|---|
| ICICI Prudential Infrastructure Fund | INF109K01AV5 | 19.40% | -19.33% | 0.75 |
| DSP India T.I.G.E.R. Fund | INF740K01151 | 20.58% | -26.14% | 0.78 |
| LIC MF Infrastructure Fund | INF767K01501 | 24.02% | -26.92% | 0.87 |
| SBI PSU FUND | INF200K01BC0 | 25.08% | -24.59% | 0.69 |
| SBI HEALTHCARE OPPORTUNITIES FUND | INF200K01446 | 15.46% | -13.63% | 1.48 |
| BANK OF INDIA MANUFACTURING & INFRASTRUCTURE FUND | INF761K01199 | 20.85% | -24.69% | 0.87 |
| Franklin India Opportunities Fund | INF090I01841 | 18.14% | -18.52% | 0.96 |
| Canara Robeco Infrastructure Fund | INF760K01274 | 21.58% | -23.68% | 0.73 |
| ICICI Prudential Exports & Services Fund | INF109K01BB5 | 14.69% | -15.06% | 0.77 |
| Aditya Birla Sun Life PSU Equity Fund | INF209KB1O66 | 25.48% | -27.38% | 0.65 |
Sectoral and thematic funds share the same official SEBI sub-category, so this list also includes thematic funds. Compare volatility and drawdown carefully, because concentration makes these funds swing more.
How to invest in Sectoral mutual funds
You can invest in these funds using the Invo Wealth app. Sign up, get complete portfolio insights and start investing in mutual funds that actually suit you.
Conclusion
Sectoral funds can reward a well-timed bet on the right industry, but they are concentrated and volatile. Keep exposure limited and invest only if you understand the sector.
Frequently asked questions
What is a sectoral mutual fund?
A sectoral fund is an equity fund that invests in businesses from the same industry or area, giving exposure to a specific part of the economy.
Do sectoral funds invest in only one company?
No. They invest in several companies, but all within the same sector.
Are sectoral funds safe to invest in?
They are among the riskier funds. As equity funds they face market volatility, and focusing on one sector reduces diversification and adds concentration risk.
Who should invest in sectoral mutual funds?
Investors with a high risk appetite, and ideally experienced investors who follow the industry closely and can handle entry and exit timing.
How can I invest in sectoral mutual funds?
You can invest through a SIP or a lump sum. To invest in these funds, you can use the Invo Wealth app: sign up, get portfolio insights and start investing.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. This article is for education only and is not investment advice. Past performance does not guarantee future returns. Invo Wealth is an AMFI-registered mutual fund distributor (ARN-368528).