Sectoral Mutual Funds
Sectoral Mutual Funds are a type of equity mutual fund that invests primarily in a specific sector of the economy. These funds focus on companies operating in particular industries, such as technology, healthcare, finance, energy, or real estate. By concentrating investments within a specific sector, these funds aim to capitalize on the growth potential of that particular segment of the market.
Best Sectoral Mutual Funds to Invest in India 2024
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HDFC Infrastructure Fund -Direct Plan - Growth Option▲ 39.6%AUM ₹2055 Cr •
Expense 1.21%
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LIC MF Infrastructure Fund Direct Plan Growth Option▲ 39.43%AUM ₹333 Cr •
Expense 1.45%
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DSP India T.I.G.E.R. Fund - Direct Plan - Growth▲ 39.24%AUM ₹4386 Cr •
Expense 1.05%
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Canara Robeco Infrastructure Direct Plan Growth▲ 38.7%AUM ₹694 Cr •
Expense 1.07%
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Invesco India Infrastructure Fund Direct Pan Growth Option▲ 38.37%AUM ₹1240 Cr •
Expense 0.79%
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Bandhan Infrastructure Fund - Direct Plan - Growth▲ 38.15%AUM ₹1343 Cr •
Expense 0.97%
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Quant Infrastructure Fund Growth Option Direct Plan▲ 37.21%AUM ₹3565 Cr •
Expense 0.66%
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Franklin Build India Fund Direct Growth▲ 37.15%AUM ₹2530 Cr •
Expense 1.01%
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HSBC Infrastructure Fund Direct Plan Growth Option▲ 37.09%AUM ₹2621 Cr •
Expense 0.97%
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Sundaram Financial Services Opportunities Fund Direct Plan Growth Option▲ 22.26%AUM ₹1269 Cr •
Expense 0.78%
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Nippon India Banking & Financial Services Fund Direct Plan - Growth▲ 20.05%AUM ₹5463 Cr •
Expense 1.09%
- Invesco India Financial Services Fund Direct Plan Growth▲ 19.77%
AUM ₹810 Cr •
Expense 1.01%
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Mirae Asset Banking and Financial Services Fund Direct Growth▲ 18.56%AUM ₹1671 Cr •
Expense 0.61%
- Franklin India Technology Fund Direct Growth▲ 18.24%
AUM ₹1435 Cr •
Expense 1.09%
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ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund Direct Growth▲ 17.62%AUM ₹3925 Cr •
Expense 1.07%
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SBI Healthcare Opportunities Fund Direct Growth▲ 17.59%AUM ₹2613 Cr •
Expense 0.95%
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Tata India Pharma & Healthcare Fund Direct Growth▲ 17.26%AUM ₹899 Cr •
Expense 0.83%
- DSP Healthcare Fund Direct Growth▲ 17.25%
AUM ₹2363 Cr •
Expense 0.66%
- SBI Banking & Financial Services Direct Growth▲ 17.15%
AUM ₹5387 Cr •
Expense 0.75%
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UTI Banking and Financial Services Fund-Direct Growth Option▲ 16.57%AUM ₹1056 Cr •
Expense 1.16%
Start SIP in Sectoral Mutual Funds as low as Rs. 50
Daily SIP | Weekly SIP | Monthly SIP
Advantages of Investing in Sectoral Mutual Funds
High Growth Potential
Sectoral mutual funds target specific high-growth sectors, offering the potential for substantial returns if the chosen sector performs well.
Expert Management
These funds are managed by professionals with specialized knowledge of the sector, leveraging their expertise and industry insights to make informed investment decisions.
Focused Exposure
Investors gain concentrated exposure to a particular sector, allowing them to capitalize on the performance of that industry without the need to pick individual stocks.
Tactical Allocation
Sectoral funds enable investors to adjust their portfolio based on market conditions and sectoral outlooks, providing flexibility to benefit from cyclical trends in specific industries.
Portfolio Diversification
Adding sectoral mutual funds to an existing diversified portfolio can enhance overall diversification by including specific industry exposure, balancing the risk and return profile.
Access to Specialized Sectors
Sectoral funds provide access to specialized and niche sectors that might be difficult for individual investors to invest in directly, such as biotechnology, renewable energy, or emerging technologies.
Disadvantages of Investing in Sectoral Mutual Funds
High Risk and Volatility
Sectoral mutual funds are inherently more volatile than diversified equity funds. Since they are concentrated in a specific sector, their performance is highly dependent on the fortunes of that sector. Any negative developments or downturns in the sector can lead to significant losses.
Lack of Diversification
Investing heavily in a single sector means that the fund's performance is not cushioned by investments in other sectors. This lack of diversification increases the risk as poor performance in the chosen sector can significantly impact the entire investment.
Sector-Specific Risks
Each sector has unique risks that can affect its performance. For example, technology funds may suffer due to rapid technological changes, healthcare funds might be impacted by regulatory changes, and energy funds can be influenced by fluctuating commodity prices. These sector-specific risks can lead to underperformance.
Economic Cycles
Different sectors perform differently during various phases of economic cycles. Sectoral funds can be highly cyclical, performing well during certain phases and poorly during others. Timing the market to capitalize on these cycles can be challenging and may lead to suboptimal returns if done incorrectly.
Limited Flexibility
Once invested in a sectoral fund, investors are locked into that sector unless they decide to sell their holdings. This limited flexibility can be a disadvantage if the investor’s outlook on the sector changes or if better investment opportunities arise in other sectors.
Points to consider before investing in Sectoral Mutual Funds
Risk Tolerance
Sectoral funds are highly volatile and carry significant risk. Ensure that your risk tolerance aligns with the potential ups and downs of investing in a single sector. If you are risk-averse, these funds may not be suitable for you.
Investment Horizon
Sectoral mutual funds are better suited for long-term investors who can withstand short-term volatility. Ensure you have a sufficiently long investment horizon to ride out market fluctuations and benefit from potential sectoral growth.
Sector Analysis
Conduct detailed research on the sector you plan to invest in. Understand the growth drivers, potential risks, and economic factors that could impact the sector's performance. A deep understanding of the sector’s dynamics is crucial for making informed investment decisions.
Portfolio Diversification
While sectoral funds offer focused exposure, they should only be a part of a well-diversified portfolio. Ensure that your overall investment portfolio is diversified across various sectors and asset classes to mitigate risk.
Market Timing
Consider the current economic cycle and market conditions. Investing in sectoral funds requires careful timing as different sectors perform better at different stages of the economic cycle. Avoid investing based solely on recent performance.
Fund Performance and Management
Analyze the historical performance of the sectoral fund, keeping in mind that past performance does not guarantee future results. Also, evaluate the expertise and track record of the fund manager to ensure they have the experience and knowledge to navigate the sector effectively.
How to Start Investing in Sectoral Mutual Funds with INDmoney
Now that you have understood what Sectoral Mutual Funds are, you need to know how easily you can start your investment with INDmoney. Just follow these simple steps given below, to start your mutual fund investment journey with us.
Step 1
Download the INDmoney app and create your free investment account by completing your KYC (Know Your Customer).
Step 2
Once your free investment account is ready, you can either search for an Sectoral Mutual Fund or go to the mutual fund section and tap on Sectoral Mutual Fund from Discover All Categories.
Step 3
Choose an Sectoral Mutual Fund by looking at aspects like past returns, volatility, downside capture ratio, AUM, expense ratios, and underlying stocks and sectors.
Step 4
You can choose to set up a SIP in an Sectoral Mutual Fund or even invest as a lump sum. Once you are on the individual Sectoral Mutual Fund page, click from the bottom “One-time” for lump sum investment or “SIP” for a systematic investment plan.
Step 5
Choose the amount that you want to invest as SIP or Lump Sum.
Step 6
Set up payments. If you choose to set up SIP in an Sectoral Mutual Fund, you can do a free automatic pay set up via bank mandate or UPI. If you choose to invest in lump sum (one-time) then you can pay via UPI, net banking, NEFT, or RTGS.
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