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What are sector focused mutual funds? What are the key sectors in the Indian stock market?

Dec 19, 2018 | 2 years ago | Read Time: 3 minutes | By iKnowledge Team

A sector fund is a reserve that invests only in particular businesses that operate in a specific sector of the economy. Sector funds are usually structured as mutual funds.

Sectoral mutual funds are schemes that only invest in specific themes of the economy, such as energy or utilities. These plans are famous for going through high-rewarding conditions, followed by long rough times.

Sector funds come in many different types and can vary in market capitalisation, investment objective (i.e. growth and income) and set of securities. Sector mutual funds do not fall into a particular category of large-cap value or mid-cap growth; instead, these sector funds are classified into the following eight categories:

  1. Natural Resources Funds: These funds invest in energy sources like oil and gas. These funds are usually suitable for long-term investors.
  2. Utility Funds: These stocks invest in shares of utility businesses. They are designed to pay regular dividends to be stable and fixed-income investors, although they have a growth factor as well. This is handled by the Association of Mutual Funds in India (AMFI).
  3. Real Estate Funds: These funds provide an opportunity for smaller investors to share the gains from property market without having to purchase real property. They offer both growth and income.
  4. Financial Funds: These stocks invest in the commercial industry. Holdings will involve shares of an investment firm, insurance firm, banking business, mortgage companies and accounting firms.
  5. Health Care Funds: These invest in the stocks of pharmaceutical corporations. Many of these stocks focus on biotechnology and the companies that are making pioneering improvements in this industry.
  6. Technology Funds: These stocks try to provide exposure in the tech sector. This sector primarily focuses on computers, electronics and other information technology that is widely used for a variety of purposes.
  7. Communications Funds: These stocks concentrate on the communications sector, including internet-related companies.
  8. Refined Metals Funds: These stocks provide exposure to a class of metals, such as gold, silver, nickel, and copper.

Some sector funds concentrate on a particular sub-sector of the economy, such as banking.

Sector funds are intended to present market sharing for investors whose experience lacks exposure of a given sector. They can also provide a more significant diversification within a given industry that may be not possible otherwise. The central goal that an investor would consider in a sector fund is a particular individual stock that the investor feels is about to experience steady growth.

Best performing sectors of  the Indian stock market:


The industry has been hammered down due to attention on over growth. However, these companies have vast stocks of cash, and have also invested in new technological innovations such as digital, portable and artificial intelligence. So far, these companies value a small portion of the profits. However, the technology industry is growing at 25 per cent per year. In the coming 3-5 years, it will be a notable earner and provide 40-80 per cent profit, from 10-20 per cent at present.

Health Care

Investors in these Mutual funds primarily invest in pharmaceutical firms in India. Since these funds are invested in a single sector, they are considered as high-risk equity investments. Since the Indian government has announced a big reform in the health-care budget (Modi-care), investors are expecting a long term capital appreciation equity of the Pharma & Healthcare companies in India.

Basic Utility

The companies that have zero leverage and are profitable and cash rich and are preferred by investors. This type of investment enables investors to transact in multiple schemes of various Funds available in MFU through a single and consolidated form of payment.


In India, government-owned NBFCs whose services are reliable and are not facing the dilemma of high non-performing assets are getting a lift by the government’s drive for rural power and electrification.

Consumer Services, Telecom, Utilities & Industrials

The companies in industrials and services are highly leveraged. Firms in consumer assistance are reasonably overvalued, while those in the telecom industry are struggling to operate.

If you want to invest in equity markets but do not necessarily have the time to study the market in detail, consider investing via ULIP schemes such as AEGON Life’s iMaximise insurance plan which allows you to choose from 6 different funds according to your specific needs. There are no allocation charges which help one to maximise the return from investment as the full amount gets exposure to the fund of one’s choice.

II/Dec 2018/4699


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