Once the favourite of houses to collect fresh money, thematic funds have mostly disappointed investors with just three themes delivering double digit returns in 2025.
Hit by Trump tantrums, the actively managed IT (Information Technology) thematic funds have delivered an average negative return of 4 per cent last year against 27 per cent logged in 2024.
In fact, the number of IT thematic funds increased to 12 last year against 7 recorded in the previous year. The AUM of IT schemes increased 8 per cent to ₹44,900 crore (₹41,207 crore), as per data sourced from Geojit Research.
Similarly, Pharma and Infrastructure thematic funds delivered negative returns of 4 per cent and 0.54 per cent, respectively, in 2025 against 40 per cent and 28 per cent delivered in 2024. While there was no new fund launches in Infra sector, the number of schemes in pharma increased to 16 (13) last year.
The AUM of pharma sector was up 7 per cent at ₹32,272 crore, and that of infrastructure was flat at ₹50,745 crore (₹50,956 crore).
Among the top performers, the thematic funds on auto and transport, banking and energy delivered highest returns of 18 per cent, 16 per cent and 11 per cent, respectively, last year but it was lower compared to 23 per cent, 11 per cent and 13 per cent logged in the previous year.
Most of the other themes delivered single digit returns last year ranging from 8 per cent to 1 per cent.
Sriram BKR, Senior Investment Strategist, Geojit Financial Services, said some of the sectors that offer strong opportunities currently include Banking & Finance, Auto, FMCG, Consumer durables / discretionary, Realty, Infra, Cement, Telecom, Healthcare and Insurance.
“Technology may see a gradual recovery as global macro risks ease and AI-led deal flow improves,” he said.
Shashank Udupa, SEBI registered Research Analyst, said in last few years MFs have come out with thematic funds on cyclical sectors such as defence, infrastructure and manufacturing to take advantage of investors’ euphoria around these sectors.
Investors should focus on long-term themes rather than focusing on cyclical industries, he said.
“We are very bullish on capital market and trading platforms over the next 10 years. Indian trading platform companies are at a nascent stage compared to China and US. However, with market cap expansion, trading platforms should also generate good Free Cash Flow and reward shareholders,” he added.
For March quarter, consumption-focused and export-oriented companies should do well with the recent GST rate cut and rupee depreciation against dollar, said Udupa.