Equity Fund Categories
Sectoral & Thematic Funds
At least 80% in one sector (banking, pharma, IT) or theme (infra, ESG, consumption).
Updated 27 September 2026 · SEBI rules as of 2026
SEBI mandate
≥ 80% in the chosen sector / theme
Equity Fund CategoriesOverview
Sectoral funds concentrate in a single sector; thematic funds follow a broader theme across sectors. They can deliver outsized gains when the theme is in favour and large losses when it is not, so they are tactical satellite holdings.
| Particular | Details |
|---|---|
| SEBI mandate | ≥ 80% in the chosen sector / theme |
| Riskometer (typical) | Very High |
| Suggested horizon | 7+ years; tactical |
| Tax | Equity: STCG 20% (< 12 m); LTCG 12.5% above ₹1.25 lakh a year |
| Benchmark | Relevant total-return index (TRI) |
Who should invest
- Experienced investors with a clear view
- Small satellite allocation (e.g. ≤ 10%)
What to check before choosing
| Parameter | Why it matters |
|---|---|
| Rolling returns | 3- and 5-year rolling returns vs benchmark and category |
| Consistency | Percentage of periods the fund beat its benchmark |
| Downside capture | How much it falls when the market falls |
| Expense ratio | Direct plans cost less than regular plans |
| Portfolio | Concentration, top holdings, sector tilt |
| Fund manager | Tenure and process |
| AUM | Very large AUM can hurt small/mid-cap agility |
Risks
- Equity market volatility — NAV can fall sharply in the short term
- Category and style cycles (e.g. small caps can underperform for years)
- Fund-manager or process risk
- Liquidity risk in smaller stocks during sell-offs
Plan your investment
Frequently asked questions
Should beginners buy sector funds?
Generally no; diversified funds are more suitable as a core.
Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Information is educational and may change with SEBI / tax rules — verify with the AMC, AMFI or SEBI. FinancePortal is not an investment adviser.