PSU and Infrastructure thematic mutual funds have outperformed other categories over 3, 5, and 10-year periods as of July 2026. While these sectors have benefited from strong government policy support and structural demand, investors should note that concentrated sector exposure carries higher volatility than diversified equity funds.
Indian equity markets have seen significant shifts over the past decade, shaped by post-pandemic recovery, evolving inflation trends, and changing global interest rates. During this period, thematic mutual funds—specifically those focused on Public Sector Undertakings (PSUs) and Infrastructure—have delivered notable returns, often outpacing broader market indices in consistent performance.
Long-Term Performance Trends
Data as of early July 2026 indicates that Infrastructure funds have shown the most consistent returns over a 10-year horizon, with an average category return of 15.95%. PSU-focused funds closely follow, showing robust strength over shorter timeframes, leading the 3-year and 5-year categories with annual returns of 25.72% and 24.31% respectively. Manufacturing-themed funds have also maintained positive growth but have shown slightly more variation in their long-term performance compared to the other two categories.
Several specific funds have stood out for their performance. In the Infrastructure space, funds such as LIC MF Infrastructure and DSP India T.I.G.E.R. have consistently appeared among top performers across multiple time horizons. Similarly, in the PSU segment, schemes like the SBI PSU Fund and Aditya Birla Sun Life PSU Equity have remained prominent. These returns have been largely supported by a steady increase in government spending on domestic manufacturing, energy transition projects, and large-scale infrastructure development.
Risks of Thematic Investing
While these performance figures highlight the potential of concentrated sector strategies, they come with distinct risks. Unlike diversified equity funds, which spread investments across various sectors, thematic funds are restricted to a single industry or theme. This means that if a particular sector faces regulatory changes, policy shifts, or a cyclical downturn, the fund's net asset value can see sharp fluctuations. For example, PSU funds are often influenced by government disinvestment policies and policy decisions, while infrastructure funds are sensitive to project execution timelines and raw material costs.
Investors looking at these categories should treat them as satellite holdings rather than core portfolio components. The inherent volatility of thematic bets means they may not always align with conservative financial goals. Before investing, it is important to evaluate one’s individual risk tolerance and ensure that these funds do not account for an outsized portion of one’s total investment portfolio. Market performance is cyclical, and periods of outperformance for specific themes are often followed by phases of consolidation.