InvestmentFinancial Glossary
Sectoral Fund
Definition
A mutual fund that invests exclusively in a single sector or industry — such as banking, IT, pharma, infrastructure, or energy. SEBI requires sectoral funds to invest at least 80% of their corpus in the designated sector. These are the highest-risk category of equity mutual funds.
Why It Matters
Sectoral funds offer concentrated exposure that can deliver outsized returns when the sector is in favour. IT funds surged 40%+ in 2020-21; pharma funds gained 60%+ in the same period. But when the sector falls out of favour, losses can be equally devastating. Sectoral funds should be at most 10% of your portfolio and require sector-specific conviction.