The three popular categories of equity mutual funds —
Equity-linked savings scheme (ELSS),
Sectoral funds and
Thematic funds
Sectoral funds. These schemes invest in a particular industry or sector to benefit from its growth. For instance, an information technology (IT) fund would invest only in IT stocks. The fortune of a sectoral fund depends entirely on the sector it invests in.
Sector funds are the riskiest funds in the equity funds space as their fortunes hinge on the performance of a particular sector. They outperform the broader market in good times, but fall faster during unfavourable periods. Go for these only if you are confident of a sector's future performance.
