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The most profitable investment returns—and the alpha that can boost a portfolio—often occur when an investor identifies and invests in an emerging sector (a new or emerging industry with growth potential) early. However, identifying such sectors at their early stages is not easy. Most retail investors enter at the end of the cycle, when the sector has already delivered significant returns to early investors. These early investors are better positioned to absorb downside risks when the sector’s growth story fluctuates.

So the question is, how can retail investors effectively participate in emerging themes or emerging sectors that could be multi-baggers?

What is a Thematic Mutual Fund

One of the most effective ways is thematic mutual funds. These funds are managed by experienced professionals who use in-depth market insights, macroeconomic analysis, and experience across multiple market cycles to identify sectors or themes with strong potential. Fund managers understand that market leadership keeps changing. Just because a sector performed well last year does not mean it will continue to do well going forward. For example, the banking sector, which is a symbol of economic recovery, has been the top-performing sector in five of the last ten calendar years. Still, very few sectors retain the top position for two consecutive years.

The relationship between a country's macroeconomic indicators and sector performance is rarely straightforward; it is often quite complex. Most retail investors do not have the time, resources, or expertise to understand these patterns. Even if one successfully identifies an emerging theme, behavioral biases such as fear and greed can lead to premature profit-taking or late exits, often when large institutional investors are reducing their positions.

Investing in such themes through a Fund-of-Funds (FoF) structure offers additional benefits from a taxation perspective. If the holding period is more than two years, long-term capital gains are taxed at a concessional rate of 12.5%, while a higher slab rate applies to direct equity investments.

Accordingly, investors looking to take advantage of emerging opportunities across sectors and themes can consider the ICICI Prudential Thematic Advantage Fund (FoF). This fund of funds scheme invests in a diversified mix of sectoral and thematic funds. As of July 30, 2025, this fund of funds scheme has delivered a return of 8.23% in one year. It has delivered a CAGR of 20.68% in three years and 26.08% in five years.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.