What are sector-specific funds/schemes?
Sector-specific mutual funds are equity funds that invest exclusively in a particular industry or economic sector such as IT, pharmaceuticals, FMCG, banking, infrastructure, or energy. These funds aim to capitalize on the growth potential of a specific sector by concentrating all their investments within that space.
While they offer the potential for high returns during sector booms, they carry significantly higher risk due to limited diversification. Performance depends heavily on the economic cycle and sector-specific developments.
Key features of sector-specific funds
- Invest in one sector or industry theme as defined in the scheme's offer document
- High return potential during sectoral uptrends
- High volatility and concentration risk
- Suitable for experienced or tactical investors with sector knowledge
What if...
| Scenario | Explanation |
|---|
| You expect strong growth in a sector | These funds help you take targeted exposure for potential outperformance. |
| The sector underperforms | Fund returns may fall sharply due to lack of diversification. |
| You want to diversify risk | Sector funds are not ideal for diversification—they focus on a narrow segment. |
| You want to invest and forget | These funds require active tracking and timely exits due to cyclical nature. |
Sector-specific funds are best suited for investors who actively follow market trends and can time their entries and exits.
Last updated: 16 Jun 2025
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