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Thematic Funds Disappoint: Only 3 Themes Beat Expectations in 2025
10 Jan
Summary
- Many thematic funds underperformed, with IT, Pharma, and Infra funds showing negative returns.
- Auto, banking, and energy themes delivered returns but lower than the previous year.
- Experts advise focusing on long-term themes over cyclical industries for better returns.
Thematic funds have largely failed to meet investor expectations in 2025, with only a handful delivering the desired double-digit returns. Information Technology, Pharmaceutical, and Infrastructure funds, which were once popular choices for accumulating capital, saw significant downturns. IT funds, for instance, posted an average negative return of 4% last year, a sharp decline from the 27% gains recorded in 2024.
Similarly, Pharma and Infrastructure thematic funds experienced negative returns of 4% and 0.54% respectively in 2025. This performance is a notable drop from the substantial 40% and 28% returns seen in the previous year. In contrast, sectors like Auto and Transport, Banking, and Energy managed to deliver positive returns of 18%, 16%, and 11% respectively, though these figures also lagged behind their 2024 achievements.
Investment strategists advise a shift in focus from short-term cyclical industries to long-term thematic opportunities. Sectors such as Banking & Finance, Auto, FMCG, and Real Estate are highlighted for their potential. Experts believe that technology may see a gradual recovery as global risks subside, and AI-driven opportunities emerge, suggesting a patient approach for this sector.
