Thematic Fund Mania: When Hype Meets Harsh Reality

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Remember the hype around thematic mutual funds last year? It was almost impossible to miss.

Mutual fund houses launched exotic funds with fancy narratives, and online platforms—from mutual fund portals to even some online bond platforms—amplified the buzz.

The stage was set like a grand Roman gladiator show.

Investors, much like eager spectators, cheered and invested in the most talked-about themes—manufacturing, EVs, tourism, defence, and more.

But where’s the promised glory now?

Narratives vs. Numbers

Amid the 2024 retail frenzy, many fund houses resorted to their classic playbook: selling stories.

With the help of digital marketing and aggressive distribution, especially through online bond platforms and investment marketplaces, they pushed thematic and sectoral funds as the next big thing.

And investors bit.

Out of 180 equity NFOs in 2024, 73 were thematic and 32 sector-based
₹88,000 crores were pumped into these funds
Thematic fund AUM tripled from ₹1.7 trillion in Mar 2023 to ₹5.1 trillion by June 2025

Why? Because it sounded exciting. Because every ad, every influencer, and many online platforms sold the dream convincingly.

But reality? Quite underwhelming.

Most of these funds delivered average returns of just 5% since inception. In fact, nearly half failed to beat the Nifty 500 index in one year.

Fund Name	Launch Date	Fund Return (%)	NFO Collection (₹ cr)
HDFC Manufacturing	16 May 2024	9.57	9,563
ICICI Prudential Energy Opportunities	22 July 2024	5.40	8,532
SBI Innovative Opportunities	20 Aug 2024	-1.95	7,837
SBI Energy Opportunities	26 Feb 2024	8.04	6,547
SBI Automotive Opportunities	07 June 2024	0.36	6,143
Axis Consumption	12 Sept 2024	-4.30	4,461
SBI Quant	26 Dec 2024	-1.71	3,512
ICICI Prudential Equity Minimum Variance	06 Dec 2024	6.00	2,446
Aditya Birla Sun Life Quant	28 June 2024	-2.57	2,419
Kotak Special Opportunities	29 June 2024	-1.40	2,356

This table above says it all — from multi-thousand crore collections to single-digit or even negative returns in less than a year.

It’s a stark reminder that popularity doesn’t always equal profitability.

Some of the largest NFOs, despite massive marketing budgets, are already in the red.

Have investors blindly followed the trend again—just like they’ve done with unverified recommendations on online bond platforms promising “high yield and safety”?

What Went Wrong?

The problem isn’t just with the funds. It’s with the timing, valuation, and the herd mentality driven by powerful narratives and online distribution channels.

Most of these thematic NFOs were launched after a sector had already experienced strong tailwinds—when valuations were stretched, and the story was fully priced in.

But unlike diversified funds, these themes are cyclical. They can go out of favour for years.

And unlike stock-specific bets, exiting a thematic mutual fund at the right time isn’t easy.

Yet, investors continue to get drawn in by eye-catching dashboards on online bond platforms and mutual fund aggregators, often unaware of the risks involved.

Should You Avoid Thematic Funds Altogether?

Not necessarily.

Thematic funds can still play a tactical role in your portfolio. But they should be capped—no more than 25% of your equity portfolio, with any single theme limited to 10%, suggests financial experts.

More importantly, these decisions shouldn’t be influenced by trends, social media hype, or online platforms alone.

Instead, they should be based on a sound understanding of market cycles, sector fundamentals, and your personal financial goals.

Lessons Beyond Thematics: Be Cautious with Online Bond Platforms Too

The thematic fund craze mirrors another growing concern—investors being misled by some online bond platforms that promise high yields without highlighting the risks.

Much like thematic NFOs, these platforms often push products based on trends and aggressive marketing rather than suitability.

Are these platforms regulated the same way as AMFI-registered mutual fund distributors? Do they disclose risks transparently?

Do investors understand the creditworthiness of the bonds offered?

Just as thematic funds require timing and awareness, so do debt products marketed online.

A Timeless Reminder: Investing is Not About Trends

Whether it’s thematic funds or instruments promoted through online bond platforms, don’t chase trends or compelling stories. Instead, ask yourself:

Do I understand where my money is going?
Am I prepared for the downside?
Am I overexposed to one theme or product?

Want to Avoid These Mistakes?

Most investors aren’t equipped to evaluate sectoral cycles, bond credit ratings, or entry-exit timing.

That’s why a Certified Financial Planner (CFP) can make a difference. They bring in-depth knowledge, objectivity, and a holistic view of your financial situation—beyond what an online platform or influencer can offer.