According to SEBI, Sectoral/Thematic Funds are open-ended equity mutual funds that invest a minimum of 80% of their assets in a particular sector or theme.
Each scheme must clearly specify the sector/theme it will focus on for investments. These schemes also have the flexibility to invest across the market cap range, viz., large-cap, mid-cap, and small-cap stocks, without restriction.
The primary difference between Sectoral and Thematic Funds lies in their scope of investment.
Sectoral Funds mainly invest in companies from one particular sector, whereas Thematic Funds are broader and invest in companies across different sectors that are linked by a specific overarching theme.
For instance, a healthcare sector fund might focus on hospitals, pharmaceutical companies, and medical device manufacturers.
On the other hand, a Thematic Mutual Fund emphasising on green energy might focus on companies involved in wind energy, solar power, and Electric Vehicles (EVs).
There are several types of Sectoral Funds currently available in India, viz., Auto Fund, Bank Fund, IT Fund, Healthcare Fund, Pharma Fund, FMCG Fund, and so on.
In recent years, sectors/themes such as green energy, infrastructure, technology, and healthcare have experienced rapid growth, fueled by technological advancements, favourable government policies, and rising global demand.
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Sectoral and Thematic Funds aligned with these thriving industries have the potential to generate strong returns.
Therefore, it is hardly a surprise that these funds are capturing keen investor interest.
However, do note that the recent import tariff hike at 25% announced by the 47th U.S. President Donald Trump is expected to impact several key sectors in India. Industries with a significant share of the market in the U.S. may face increased costs and an inability to compete in the U.S market.
Some of the most impacted industries could include (but may not be limited to) textiles and apparel, jewellery and gemstones, pharmaceuticals, IT services, automotive parts, and electronics. Indian steel and aluminium exports could also see a decline if additional duties are imposed, impacting domestic production and profitability for Indian metal producers.
Overall, variable tariffs may create a scenario where India rethinks its export strategies businesses could use efforts to market to multiple export markets and diversify supply chains,
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