Sectoral and thematic investing: what thirteen years of NSE sector indices show

Sectoral and thematic funds, defined

SEBI's 2017 circular on categorising mutual fund schemes puts sectoral and thematic funds in one category with one rule: at least 80% of the fund's assets in the equity of the named sector or theme.

• Sectoral: one industry. Banking, IT, pharma and healthcare, FMCG, auto, energy, infrastructure.
• Thematic: an idea that spans several industries. Consumption, manufacturing, PSU companies, ESG, defence, digital India.

Both are concentrated by design. A diversified fund spreads money across the market; a sector fund chooses one slice of it. The note the diversifier that concentrates shows how adding a sector fund to a diversified portfolio often doubles a bet the investor already had.

Thirteen years of sector returns

NSE publishes a price index for each major sector. Here are nine of them, every calendar year since 2013, from NSE's daily closing values.

Read across a row and each sector looks like a rollercoaster. Read down a column and the spread in any one year is huge: in 2017 Realty rose 109.8% while Pharma fell 6.3%; in 2022 PSU Bank rose 70.7% while IT fell 26.0%. The gap between the best and the worst of the nine averaged about 67 points a year from 2013 to 2025, and never fell below 39 points.

The leader rarely stayed the leader

The best sector each year from 2013 to 2025 was, in order: IT, PSU Bank, Pharma, Metal, Realty, IT, Realty, Pharma, Metal, PSU Bank, Realty, Pharma, PSU Bank. Five sectors shared the thirteen top spots, and no sector led two years running.

The same names also filled the bottom of the table. Realty was best in 2017 and worst in 2018. PSU Bank was best in 2014 and worst in 2015. Pharma led in 2020 and was near the bottom in 2022. Picking next year's winner from this year's table would have failed every single year.

The long run: most sectors ended near the index

Over the full thirteen years, the differences shrink. Here is each sector's compound rate from 31 Dec 2012 to 31 Dec 2025:

Two sectors beat the index by more than two points a year; two lagged it by about three to five. The rest finished close to it, after taking their holders through much wider swings. The end date matters here too: measured to 12 Oct 2026, IT's figure falls to 11.90% a year after a fall of 38% from its December 2024 high.

The falls inside each sector

Measured on daily closes from Feb 2012 to 12 Oct 2026, the deepest fall from a high to a later low:

A fall of 75% needs a rise of 300% to recover. PSU Bank took more than five years to reach its low and did not close above its January 2015 level again until 13 Dec 2022, almost eight years after it. Two sector falls are still running in 2026: IT was 38.4% below its December 2024 high and FMCG 33.5% below its September 2024 high on 12 Oct 2026.

New themes, short records

Thematic indices are launched when a theme is popular, which means their live history usually starts near a high point of interest. In NSE's daily index files, the Nifty India Defence index first appears on 19 Jan 2022; the Nifty EV and New Age Automotive, Nifty India Railways PSU and Nifty Capital Markets indices on 12 Apr 2023; the Nifty Chemicals index on 11 Mar 2025; the Nifty AI Catalysts index on 15 Sep 2026. Many are calculated back before their launch dates, so a factsheet can show a long record that nobody could actually have invested in.

Two questions help with any new theme. How long is the live record, as opposed to the back calculated one? And has the theme been through a fall yet? A theme with three years of history and no bear market has not shown you its worst case. The nine sector indices above have, and the falls in the next table are what that looked like.

How to size a sector bet

If a sector story convinces you, the question is not whether it is right but how much of your money can carry it being wrong for three years. A simple test: take the sector's worst fall in the table and multiply by the share of your portfolio you plan to put in it.

At 10% of a portfolio, a 50% sector fall costs 5% of the whole. At 40%, it costs 20%, which is a bear market for the whole portfolio from one decision. That is why sector and thematic holdings are usually kept as satellites, a small slice next to a diversified core, and sized so that their worst case is survivable. The position size calculator applies the same idea to single holdings.

A few more checks before a sector fund:

• Look for overlap. A flexi cap or Nifty 50 fund already holds banks, IT and energy. A banking fund on top of it raises a weight you already have.
• Ask what the theme is priced at. On 12 Oct 2026 the Nifty FMCG traded at a P/E of 30.59 and the Nifty Bank at 13.02, NSE's daily file. A good story at a high price leaves less room for error.
• Decide the exit rule first. A sector bet without a written rule for when to cut it tends to be held through the fall and sold near the bottom.

How this shows up in RupeeCase

RupeeCase keeps its two sector rules in a separate thematic satellite tier, so they are never presented as a core. Energy Basket picks 10 energy stocks by rule, rebalanced every week: model CAGR 33.12%, deepest fall −39.48%, as of 27 Apr 2026. Healthcare Basket does the same for healthcare: model CAGR 15.19%, deepest fall −33.29%. Both show the deeper falls a sector carries, and the note the satellite, not the planet explains how to size one. The sector pages list which sectors the full lineup holds today.

Questions investors ask