Sectoral Fund
An equity fund that invests at least 80% of its assets in companies from a single sector.
How it is identified
Test: minimum 80% allocation to one defined sector, such as banking, pharmaceuticals or technology
Unit
qualitative
In depth
A sectoral fund is a concentrated bet: it removes the diversification that is the main reason to hold a fund at all, so its volatility is far higher than a diversified equity fund's. Sector returns are cyclical and dispersed, which means the timing decision matters more than the fund's quality — and sectoral funds are typically launched after a sector has already performed well, which is when investors are most eager and prospects least attractive. They are appropriate as a small satellite holding for someone with a specific view, not as a core. Judging one against a broad index rather than its own sector index is meaningless.
Worked example
A sector index falls 45% over two years while the broad market rises 8%. A fund holding 80% of that sector cannot avoid most of the fall, however well its manager selects within it.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Sectoral Fund” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.