Investing in India can be both rewarding and challenging. While traditional mutual funds provide broad market exposure, thematic mutual funds, on the other hand, allow investors to focus on specific growth trends such as infrastructure, technology, renewable energy, or ESG-compliant companies.
Moreover, by investing in the best thematic mutual funds, you can align your portfolio with India’s evolving economic story and, at the same time, still enjoy diversification across sectors and companies.
This guide explains everything NRIs need to know about thematic funds, including how they work, their benefits, risks, and the step-by-step investment process.
What Are Thematic Funds?
A thematic mutual fund is an equity-oriented fund that invests in companies connected by a specific theme or idea, rather than focusing solely on market capitalization or industry classification. These funds aim to capitalize on macro trends, technological innovation, or social change. Unlike traditional sectoral funds that focus narrowly on one industry, the best thematic mutual funds span multiple sectors linked to the same trend.
For instance, a renewable energy-themed fund may include solar power companies, electric vehicle manufacturers, and green infrastructure developers. This approach ensures diversified exposure within a single macro trend.
Key Features of Thematic Mutual Funds:
- Invests across industries and sectors aligned with a specific theme.
- Follows a top-down approach: fund managers identify a theme first, then select companies likely to benefit.
- As per SEBI rules, sectoral & thematic funds must invest at least 80% of assets in equity & equity-related instruments aligned with the theme.
- Offers potential high growth and diversification within the theme.
Example: A renewable energy-themed fund may include:
- Solar power companies
- Electric vehicle manufacturers
- Green infrastructure developers
This approach ensures exposure to multiple industries benefiting from the same macro trend.
How Thematic Funds Work for NRIs
The best thematic mutual funds follow a structured approach:
- Identify a Trend or Theme: Fund managers analyze emerging trends, such as AI, renewable energy, or digital services.
- Select Sectors & Companies: Choose companies expected to benefit from the theme.
- Allocate Assets: At least 80% of assets must go to equities linked to the theme, the rest can be in other equities or debt instruments.
- Active Management: Managers continuously track regulatory changes, consumer behavior, and technological developments to adjust investments.
Key Benefits of Thematic Funds for NRIs
- Broader Diversification: Exposure across sectors reduces the impact of poor performance in any single industry.
- Early Access to Emerging Trends: Additionally, you can position your portfolio to benefit from trends before they become mainstream.
- Flexible Risk Management: Investors can adjust exposure based on risk tolerance. For instance, within a tech-focused theme, large-cap IT companies offer lower risk, while mid-cap innovators offer higher growth potential.
- Portfolio Enhancement: : Allocating 5–10% of your portfolio to well-researched thematic mutual funds can improve overall returns.
Popular Investment Themes in India for 2025
India’s economy is being transformed by structural reforms, digital adoption, and sustainability goals. These five themes will drive growth over the next decade.
1. Technology & IT
India’s technology industry generated $282.6 billion in revenue in FY2025E, growing 5.1% despite global headwinds. Sub-sectors like Engineering R&D ($55.7B), GCCs, and BPM ($54.6B) emerged as growth drivers. Digital engineering expanded into BFSI, healthcare, and retail. With over 1,750 GCCs and strong domestic tech spending (+7% YoY), the sector is projected to hit the $300 billion milestone by FY2026.
2. Renewable Energy
With a target of 500 GW renewable capacity by 2030, India is heavily investing in solar, wind, and energy storage. The renewable energy market is expected to reach $46.7 billion by 2032, supported by government reforms and sustainability initiatives.
3. Pharmaceuticals & Healthcare
India is the world’s largest vaccine producer and the third-largest pharmaceutical industry by volume. Ongoing R&D, exports, and cost-effective medicine production make this sector a $450 billion opportunity by 2047.
4. Consumer Goods
Rising incomes, urbanization, and a young population are fueling demand in the FMCG sector. India’s consumer market is projected to hit $4.3 trillion by 2030, making it the world’s second-largest.
5. Infrastructure
Government initiatives such as Smart Cities, Bharatmala, and Sagarmala are driving growth in construction, urban housing, and logistics. The sector is expected to reach $1.45 trillion in five years, growing at a CAGR of 15.3%.
Each theme offers unique opportunities and varying levels of risk and growth potential. Combining multiple themes can create a balanced, high-potential portfolio.
Popular Types of Thematic Mutual Funds for NRIs
To tap into these themes, NRIs can explore the best thematic mutual funds in India, each designed to capture a specific growth opportunity.
| Type of Fund | Focus Area / Example |
| Dividend Yield Funds | Companies that pay consistent dividends (e.g., ITC, Coal India). |
| PSU Equity Funds | Government-owned enterprises benefiting from reforms and infrastructure push. |
| MNC Funds | Multinational companies with strong balance sheets and global operations (e.g., Nestlé, HUL). |
| Energy Funds | Renewable (solar, wind, green hydrogen) and conventional energy (oil & gas). |
| Consumption Funds | Consumer goods & services, tapping into India’s rising middle-class demand. |
| ESG Funds | Companies following Environmental, Social, and Governance principles. |
| Manufacturing Funds | Linked to infrastructure, metals, chemicals, construction, and engineering. |
Top 5 Thematic Mutual Funds in India
Here are the best thematic mutual funds that have performed well recently (as of 2025).
| Fund Name | Theme/Focus | 3-Year Annualized Returns (Sept 2025) | Key Highlights |
| ICICI Prudential Manufacturing Fund | Manufacturing & Infrastructure | 24.91% | Strong long-term capital appreciation; large AUM of ₹6,490 Cr; invests mainly in manufacturing companies. Top sectors: Construction, Iron & Steel, Auto Parts. |
| Franklin India Opportunities Fund | Diversified Thematic | 29.36% | Well-diversified thematic fund with steady, high performance over years; large asset base and consistent growth. |
| Canara Robeco Consumer Trends Fund | Consumer Goods | 14.89% | Focuses on consumption trends benefiting from India’s growing consumer market with good risk-adjusted returns. |
| ICICI Prudential Commodities Fund | Commodities & Thematic | 12.34% | Exposure to commodities sector; strong CAGR aligned with commodities thematic growth. |
| Tata Business Cycle Fund | Business Cycles & Thematic | 15.77% | Growth-oriented thematic fund focusing on business cycle sectors with consistent returns. |
How NRIs Can Invest in Thematic Funds in India
Investing in Indian thematic funds as an NRI requires a few steps:
- Open an NRE or NRO Account:
- NRE Accounts: Funds from abroad, fully repatriable.
- NRO Accounts: Income earned in India, partial repatriation.
- NRE Accounts: Funds from abroad, fully repatriable.
- Complete KYC: Submit the following:
- Passport with photo and address
- PAN card
- Overseas address proof (utility bill or driving license)
- Recent photograph
- Cancelled cheque or Indian bank statement
- FATCA declaration
- Passport with photo and address
- Choose Investment Mode:
- Lump-sum investment or Systematic Investment Plan (SIP)
- Lump-sum investment or Systematic Investment Plan (SIP)
- Check Country-Specific Restrictions: Some AMCs do not accept US or Canadian NRIs due to FATCA, but offline options may be available.
Risks to Consider
- Concentration Risk: Focused exposure means performance heavily depends on the chosen theme.
- Market Volatility: Themes may underperform during certain market cycles.
- Regulatory Risks: Government policy changes can impact sectors like energy or defense.
- Long-Term Horizon Required: Some themes may take years to deliver expected returns.
For more insights, check out our guide on Best Indian Mutual Funds to Invest in 2025.
Final Thoughts
Thematic mutual funds allow NRIs to tap into India’s high-growth sectors while spreading risk across related industries. They’re ideal for investors with a higher risk appetite and strong conviction in specific macroeconomic trends.
Investment Tip: Consider putting around 5–10% of your portfolio into well-researched thematic funds. Simply open an NRE or NRO account, complete your KYC, and start investing easily through AMC websites, registrars, or apps like SBNRI.
Important: Remember, thematic funds can be more concentrated and volatile than broadly diversified funds, so it’s always a good idea to consult a financial advisor before diving in.
FAQs
Q1. What is a thematic mutual fund?
A thematic mutual fund invests in companies linked to a specific theme or trend rather than an industry or market cap.
Q2. What is a thematic fund example?
An example of a thematic mutual fund is a renewable energy fund that invests in solar power companies, electric vehicle manufacturers, and green infrastructure developers.
Q3. Is it safe to invest in thematic funds?
While thematic funds offer high growth potential, they carry higher volatility and require a long-term horizon. Investors should allocate only a portion (5–10%) of their portfolio.
Q4. What is the difference between thematic funds and sector funds?
- Thematic funds span multiple sectors aligned to a macro trend (e.g., renewable energy = solar, EVs, infra).
- Sector funds focus narrowly on a single industry (e.g., only IT or only Pharma).
Q5. Is thematic investing good?
Yes, if done strategically. Allocating 5–10% of your portfolio to the best thematic mutual funds can enhance diversification and growth potential while aligning with India’s growth story.
Q6. Which type of mutual fund is a thematic fund?
Thematic funds are equity-oriented mutual funds designed around a specific investment theme such as technology, infrastructure, or ESG.
Q7. What are the 4 types of funds?
The four common mutual fund types are:
- Equity Funds
- Debt Funds
- Hybrid Funds
- Thematic / Sector Funds
Q8. Top 5 thematic mutual funds
As of 2025, some of the top performing thematic mutual funds include:
- ICICI Prudential Manufacturing Fund
- Franklin India Opportunities Fund
- Canara Robeco Consumer Trends Fund
- ICICI Prudential Commodities Fund
- Tata Business Cycle Fund
Q9. Can NRIs get a dedicated wealth manager with SBNRI?
Yes! When you invest through the SBNRI App, you can get a dedicated wealth manager who will guide you on your portfolio, suggest suitable thematic funds, and help you make informed investment decisions.
Q10. How easy is it to start investing with SBNRI?
It’s simple! You can download the SBNRI App, complete your KYC, and start investing in just 3 easy steps. The platform is designed specifically for NRIs, making it easy to track your portfolio from anywhere in the world.
