Several sectoral and thematic mutual funds have delivered strong short-term returns in the last 6 months despite market volatility and global uncertainty. Investors who stayed invested in themes like power, defence, healthcare, capital markets, and natural resources have seen attractive gains ranging between 12% and 22% during this period.
Interestingly, many of these top-performing mutual funds belong to thematic and sectoral categories, which are known for high growth potential but also higher risk. While such funds can generate superior returns during favorable market cycles, they can underperform sharply when sector momentum weakens.
In this article, we will review 10 mutual funds that generated 12% to 22% returns in the last 6 months as of May-2026, along with their investment objective, risk factors, suitability, and our view on each fund.
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How We Filtered These Mutual Funds
To prepare this list of top-performing mutual funds, we considered all equity mutual fund categories including:
- Sectoral mutual funds
- Thematic mutual funds
- Index funds
- ETF Fund of Funds (FoFs)
- Diversified equity mutual funds
However, we excluded:
- International mutual funds / Global equity funds
- Overseas FoFs
- ETFs
Additional filtering criteria used:
- Only Direct Plans were considered
- Returns are based on 6-month performance
- Data is as of 22-May-2026
- Data sources include from Moneycontrol and Value Research
The purpose of this article is to provide an educational snapshot of recent mutual fund performance trends across equity categories.
List of Top 10 Mutual Funds With 12% to 22% Returns in Last 6 Months – May-2026 Update
1) Groww BSE Power ETF FOF – Direct Plan
Fund Objective
This fund invests in units of ETFs tracking companies in the power sector. It aims to benefit from opportunities in power generation, transmission, and related infrastructure businesses.
Annualised Returns
- 6 Months: 22.3%
Who may consider this category?
- Investors with high risk appetite
- Investors bullish on India’s power and infrastructure growth story
- Investors looking for sectoral exposure
Risk Factors
- Sector concentration risk
- High volatility during market corrections
- Regulatory and policy-related risks
Our Observation
Power sector funds have seen strong momentum due to increased infrastructure spending and rising power demand. However, investors should remember that sectoral funds can be cyclical and volatile.
2) DSP Natural Resources and New Energy Fund – Direct Plan
Fund Objective
This fund invests in companies engaged in natural resources, energy, mining, utilities, and new energy themes.
Annualised Returns
- 6 Months: 18.0%
- 1 Year: 27.1%
- 3 Years: 26.0%
- 5 Years: 19.0%
- 10 Years: 20.8%
Who may consider this category?
- Aggressive investors
- Investors seeking commodity and energy sector exposure
- Long-term investors with high volatility tolerance
Risk Factors
- Commodity price fluctuations
- Global economic slowdown risks
- Sector cyclicality
Our Observation
The fund has demonstrated strong long-term consistency across multiple time frames. However, commodity-linked sectors can witness sharp ups and downs.
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3) Motilal Oswal Nifty Capital Market Index Fund – Direct Plan
Fund Objective
The scheme tracks companies operating in stock exchanges, brokerage businesses, asset management, and capital market infrastructure.
Annualised Returns
- 6 Months: 17.7%
- 1 Year: 36.5%
Who may consider this category?
- Investors optimistic about India’s capital market growth
- High risk investors
- Investors seeking thematic opportunities
Risk Factors
- Market sentiment impacts earnings significantly
- High dependence on trading activity volumes
- Sector concentration risk
Our Observation
Capital market themes have performed exceptionally well due to increasing retail participation in equity markets. However, investors should avoid overexposure to a single sector.
4) Tata Nifty Capital Markets Index Fund – Direct Plan
Fund Objective
This index fund invests in companies linked to India’s capital market ecosystem.
Annualised Returns
- 6 Months: 17.5%
- 1 Year: 36.0%
Who may consider this category?
- Aggressive investors
- Investors looking for thematic index exposure
- Investors with medium to long-term horizon
Risk Factors
- Market cycle dependency
- Sector concentration risks
- Earnings slowdown during weak market phases
Our Observation
The fund has benefited from the ongoing growth in India’s financialization trend. Investors may evaluate allocation limits for thematic funds based on their diversification needs and risk appetite.
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5) HDFC Defence Fund – Direct Plan
Fund Objective
The fund invests in companies operating in defence manufacturing, aerospace, and allied sectors.
Annualised Returns
- 6 Months: 13.9%
- 1 Year: 16.6%
Who may consider this category?
- Investors seeking exposure to India’s defence manufacturing growth
- High risk investors
- Long-term investors
Risk Factors
- Defence sector valuation risks
- Policy and government spending risks
- High thematic concentration
Our Observation
Defence sector mutual funds have gained investor attention due to strong government focus on domestic manufacturing and exports. However, valuations in this segment appear elevated.
6) HDFC Pharma and Healthcare Fund – Direct Plan
Fund Objective
This fund primarily invests in pharmaceutical, healthcare, hospitals, diagnostics, and allied healthcare businesses.
Annualised Returns
- 6 Months: 13.1%
- 1 Year: 21.7%
Who may consider this category?
- Moderate to aggressive investors
- Investors seeking defensive sector exposure
- Long-term healthcare theme investors
Risk Factors
- Regulatory risks
- Global pricing pressure on pharma companies
- Currency fluctuation risks
Our Observation
Healthcare funds can provide relatively defensive characteristics during volatile markets. This category is often considered by investors seeking sector diversification.
7) Mirae Asset Healthcare Fund – Direct Plan
Fund Objective
The scheme invests across pharmaceutical, biotech, diagnostics, and healthcare service companies.
Annualised Returns
- 6 Months: 13.0%
- 1 Year: 17.8%
- 3 Years: 29.8%
- 5 Years: 16.8%
Who may consider this category?
- Investors with moderate to high risk appetite
- Investors looking for healthcare sector opportunities
- Long-term investors
Risk Factors
- Sector-specific volatility
- Regulatory and export risks
- Concentration risk
Our Observation
The fund has shown strong 3-year performance. Healthcare themes generally tend to perform better during uncertain economic environments.
8) Kotak Healthcare Fund – Direct Plan
Fund Objective
This fund invests in companies from the pharmaceutical and healthcare sectors.
Annualised Returns
- 6 Months: 13.0%
- 1 Year: 18.1%
Who may consider this category?
- Investors seeking sector diversification
- Long-term investors
- Moderate to aggressive investors
Risk Factors
- Pharma sector regulatory challenges
- Export market risks
- Healthcare valuation risks
Our Observation
Healthcare sector funds can add diversification to equity portfolios. Healthcare sector funds are generally evaluated with a long-term investment horizon.
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9) Kotak MNC Fund – Direct Plan
Fund Objective
The fund invests in multinational companies operating in India across sectors.
Annualised Returns
- 6 Months: 13.0%
- 1 Year: 23.6%
Who may consider this category?
- Investors seeking quality businesses
- Moderate risk investors
- Long-term wealth creation investors
Risk Factors
- Limited sector diversification
- Valuation risks
- Global business exposure risks
Our Observation
MNC funds generally invest in established and financially strong companies. Such funds generally invest in established multinational businesses across sectors.
10) Groww Nifty India Defence ETF FoF – Direct Plan
Fund Objective
The scheme invests in ETFs tracking defence sector companies.
Annualised Returns
- 6 Months: 12.4%
- 1 Year: 10.4%
Who may consider this category?
- High risk investors
- Investors seeking defence sector exposure
- Investors comfortable with thematic volatility
Risk Factors
- Sector concentration risk
- Government policy dependency
- Sharp corrections possible after rallies
Our Observation
Defence-themed funds continue to attract investors due to strong sector momentum. Concentrated exposure to a single sector can increase portfolio volatility.
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Quick Comparison Table – Top Performing Mutual Funds
| Fund Name | 6 Month Return | 1 Year Return | 3 Year Return | 5 Year Return | Category |
|---|---|---|---|---|---|
| Groww BSE Power ETF FOF | 22.3% | NA | NA | NA | Power/Thematic |
| DSP Natural Resources and New Energy Fund | 18.0% | 27.1% | 26.0% | 19.0% | Energy/Thematic |
| Motilal Oswal Nifty Capital Market Index Fund | 17.7% | 36.5% | NA | NA | Capital Markets |
| Tata Nifty Capital Markets Index Fund | 17.5% | 36.0% | NA | NA | Capital Markets |
| HDFC Defence Fund | 13.9% | 16.6% | NA | NA | Defence |
| HDFC Pharma and Healthcare Fund | 13.1% | 21.7% | NA | NA | Healthcare |
| Mirae Asset Healthcare Fund | 13.0% | 17.8% | 29.8% | 16.8% | Healthcare |
| Kotak Healthcare Fund | 13.0% | 18.1% | NA | NA | Healthcare |
| Kotak MNC Fund | 13.0% | 23.6% | NA | NA | MNC |
| Groww Nifty India Defence ETF FoF | 12.4% | 10.4% | NA | NA | Defence |
Key Observations From Mutual Fund Performance
- Sectoral and thematic mutual funds dominated the top performers list
- Power and capital market themes generated strong short-term returns
- Healthcare and defence funds also delivered healthy gains
- Several top-performing funds carry high concentration risk
- Investors should avoid investing based purely on recent returns
- SIP investment strategy may help reduce volatility risks in thematic categories
Should You Invest in These Mutual Funds Now?
Investors should understand that short-term returns may not continue forever. Sectoral and thematic mutual funds generally perform well during favorable business cycles but can witness sharp underperformance during weak market phases.
Instead of chasing recent winners, investors should evaluate:
- Their financial goals
- Risk appetite
- Investment horizon
- Existing portfolio diversification
Many investors prefer diversified mutual funds as core portfolio holdings, while sectoral and thematic funds are often evaluated as tactical or satellite allocations.
Conclusion
The last 6 months have been rewarding for investors in select sectoral and thematic mutual funds. Power, capital market, healthcare, and defence themes delivered strong returns despite market volatility.
However, investors should remember that higher returns usually come with higher risks. Sectoral and thematic mutual funds can be extremely volatile and may not suit conservative investors.
Investors should diversify investments across categories and continue disciplined SIP investing instead of making decisions purely based on recent performance.
Disclaimer: This article is for educational and informational purposes only and should not be construed as investment advice or recommendation. Mutual fund investments are subject to market risks. Investors should consult a financial advisor before making investment decisions and read all scheme-related documents carefully.
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