Best Thematic Mutual Funds for 2025: Power Up Your Portfolio

Graph: Inflows in Sectoral/Thematic Mutual Funds logs record high growth

SBI PSU Fund’s Performance across Market Cycles

Over the years, the SBI PSU Fund has showcased resilience and delivered steady returns, largely driven by government reforms, infrastructure spending, and cyclical recovery in core sectors. As of 2024, the fund has delivered superior returns over the last year, along with a 3-year CAGR of 39.95% and a 5-year CAGR of 26.07%, outperforming its category average in most periods.

Sectorally, the fund is heavily tilted towards energy, banking, and metals-industries where PSUs hold a dominant position. This focused approach allows the fund to benefit directly from government-led initiatives such as disinvestment programs, green energy transitions, and increased infrastructure spending.

The SBI PSU Fund is ideal for investors with a moderate to high- risk appetite and a long-term investment horizon of 5-7 years or more. It is particularly appealing to those looking to align their portfolios with India's economic growth story through government-backed companies. However, given the concentration risk and dependency on government policies, investors should assess their risk tolerance and align the fund with their financial goals before investing.

#2 - Quant ESG Equity Fund

Quant ESG Equity Fund offers a unique investment opportunity for individuals looking to align their portfolios with sustainable and responsible investing principles. ESG (Environmental, Social, and Governance) factors are at the heart of this fund's strategy, focusing on companies that adhere to high standards of sustainability, ethical practices, and strong corporate governance.

The fund seeks to deliver long-term capital appreciation by investing in businesses that not only demonstrate financial resilience but also contribute positively to society and the environment. Launched in November 2020, the Quant ESG Equity Fund has quickly gained attention in the Indian mutual fund space due to its distinct approach to blending profitability with responsibility. The fund is benchmarked against the NIFTY 100 ESG Index, reflecting the performance of companies adhering to ESG principles.

Managed by Quant Mutual Fund's experienced team, the fund employs a research-driven strategy to identify companies with strong ESG metrics that may withstand market volatility and regulatory challenges.

The Quant ESG Equity Fund has shown promising performance since its inception, backed by a growing global and domestic focus on ESG investing. In 2024, the fund delivered substantial returns, demonstrating its potential for steady growth. Its success is rooted in its allocation strategy, which combines traditional financial analysis with ESG criteria to select stocks.

However, do note that the scheme is new in the market and does not carry a long performance track record; thus, investors may consider their suitability before investing in this scheme.

The fund maintains a diversified portfolio across sectors such as technology, consumer goods, healthcare, and renewable energy. The Quant ESG Equity Fund is particularly suited for investors with a long-term investment horizon and a keen interest in sustainable investing. It appeals to individuals who want to contribute to environmentally and socially responsible companies without compromising on returns.

However, as a thematic fund, it carries risks associated with sectoral concentration and market volatility. Investors must be prepared to hold their investments through market cycles and consider the fund as a complementary component in a diversified portfolio. Its ESG focus also makes it sensitive to evolving regulatory and industry standards, which could impact its performance.

#3 - UTI Transportation & Logistics Fund

UTI Transportation & Logistics Fund is a thematic equity fund focusing on the transportation and logistics sector, which forms the backbone of India's economy. The fund invests in companies involved in automobiles, auto components, railways, shipping, aviation, and logistics services, capitalising on the growing demand for mobility and supply chain efficiency in the country.

Launched in April 2004, this fund has carved a niche for itself by consistently delivering value to its investors. It is benchmarked against the Nifty Transportation and Logistics TRI, reflecting the performance of leading companies in the sector. The fund's investment philosophy revolves around identifying high-growth opportunities across the transportation and logistics ecosystem, with a focus on innovation, operational efficiency, and market leadership.

The fund has exhibited strong performance over the years, supported by rising automobile demand, growing e-commerce, and government investments in infrastructure. As of 2024, the fund has delivered substantial returns over the past few years, with a 3-year CAGR of 28.77% and a 5-year CAGR of 23.28%, consistently outperforming its benchmark.

UTI Transportation & Logistics Fund is tailored for investors with a long-term horizon and a high-risk appetite seeking to capitalise on India's evolving transportation landscape. It is ideal for those who believe in the transformative potential of electric vehicles, infrastructure modernisation, and logistics efficiency.

Given its reliance on sectoral trends and economic cycles, the fund is best for seasoned investors who could handle market volatility. While the fund offers significant upside potential, its concentrated focus requires careful consideration of risks, making it a powerful yet nuanced addition to an investor's portfolio.

[Read: Investing in High-Risk Mutual Funds: A Bold Approach]

#4 - Franklin India Opportunities Fund

Franklin India Opportunities Fund is a diversified equity mutual fund that focuses on identifying and capitalising on opportunities across sectors and themes in the Indian economy. Launched in February 2000 with a vision to invest in companies that exhibit strong growth potential, this fund offers exposure to industries and businesses that are poised to benefit from macroeconomic trends, industry transformations, and emerging market opportunities.

This fund is designed to deliver long-term capital appreciation by investing in a mix of large-cap, mid-cap, and small-cap stocks.

The scheme has consistently delivered competitive returns by identifying growth stories at the right time. Over the past year, the fund has achieved a 3-year CAGR of 28.37% and a 5-year CAGR of 26.45%. It has shown resilience through various market cycles by adopting a disciplined, research-driven approach.

The Franklin India Opportunities Fund is tailored for investors with a medium to high-risk tolerance and a long-term investment horizon. It is particularly suited for those who wish to benefit from India's evolving economic landscape through a diversified portfolio that captures growth across various themes and sectors.

However, like any equity fund, it carries market-related risks, and investors should be prepared for short-term volatility while staying focused on long-term goals.

#5 - ICICI Pru Commodities Fund

ICICI Prudential Commodities Fund is a thematic equity fund designed to capitalise on the immense growth potential of commodity-related sectors. Commodities are the backbone of many industries, and this fund focuses on businesses involved in the production, processing, and distribution of commodities such as metals, energy, and agriculture.

Launched in October 2019, the fund is benchmarked against the Nifty Commodities TRI Index, ensuring its performance is aligned with the broader commodity sector trends. It offers investors a chance to diversify their portfolios with exposure to sectors that benefit from global demand, inflation trends, and industrial expansion.

The ICICI Pru Commodities Fund has demonstrated solid performance, particularly during periods of commodity price upcycles and global economic recovery. As of 2024, the fund has delivered impressive 1-year returns, with a 3-year CAGR of 26.65%, outperforming its benchmark & category average in recent years. This performance is driven by strategic investments in sectors such as energy, metals, and industrial materials.

Within the equity portion, the fund invests in a diversified mix of commodity-linked sectors. This strategic allocation ensures the fund benefits from multiple commodity cycles while minimising concentration risk.

The ICICI Prudential Commodities Fund is ideal for investors seeking to diversify their portfolios with exposure to commodity-driven sectors. While the fund offers high growth potential, it also comes with risks related to commodity price volatility, geopolitical developments, and global economic factors.

To conclude...

Thematic mutual funds are an excellent way for investors to align their portfolios with high-growth trends and emerging opportunities. In 2025, innovative themes are expected to dominate, driven by strong government policies and global demand.

Ultimately, thematic funds are considered to work well when incorporated into a well-diversified portfolio. By carefully selecting funds that resonate with your investment objectives, you could tap into the potential of emerging trends and position your portfolio for significant growth in the years to come.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.