new delhi, Nov. 12 -- India's mutual fund industry is facing a curious paradox, with asset managers doubling down on thematic and sectoral funds even as investors in new fund offers (NFOs) turn lukewarm towards them. Capital raised through thematic NFOs in the 12 months ended October 2025 plunged 52% from a year earlier, totalling around Rs.33,712 crore, data from the Association of Mutual Funds of India showed. Further, the share of thematic and sectoral funds in overall NFO collections declined to 42% from 62% the previous year. Yet, the pace of launches barely missed a beat-mutual funds introduced 45 new thematic and sectoral NFOs in the 12 months to October 2025, virtually unchanged from the previous year's 44. According to industry experts, the contradiction stems from a regulatory stricture barring mutual funds from having more than one scheme in categories such large-caps and mid-caps. However, the restriction does not apply to thematic funds and sectoral funds, index funds, and others. This prompts asset managers to craft schemes focusing on specific themes or sectors to attract new investors, as they are not subject to this restriction. "When it comes to thematic funds, you can have as many thematic funds as you want, and every new launch of a fund is an opportunity for an AMC to incentivize distributors and get assets," said Srikanth Meenakshi, co-founder at PrimeInvestor. Juzer Gabajiwala, director at broking firm Ventura echoed agreed, calling thematic launches an effective tool for asset mobilization and visibility, especially for funds aiming to maintain growth amid a saturated product landscape. Among the thematic and sectoral schemes launched this year, the biggest are HDFC AMC's Innovation Fund (AUM of Rs.2,730 crore), ICICI Prudential's Quality fund (Rs.2,253 crore), and ICICI Prudential Rural Opportunities Fund (Rs.1,944 crore), as per scheme disclosures made by AMCs. And, it's not NFOs alone-net inflows into existing thematic and sectoral funds-while still higher than other categories-plunged 58% in the 12-month period, settling at Rs.58,317 crore from over Rs.1.4 trillion a year earlier. Meanwhile, large-cap, mid-cap, and small-cap schemes saw net inflows surge by 80%, 70%, and 51%, respectively. The outcome: Thematic and sectoral funds' contribution to total equity inflows shrank from a commanding 40% to a mere 15% in a year....