Mumbai, Jan. 2 -- Sectoral and thematic funds experienced a strong performance in 2025, with a handful of focused strategies delivering outsized returns. Funds tracking the Nifty PSU Bank Index topped the charts with returns of about 26%, followed closely by the Nifty Metal at 24%, and the Nifty Auto at around 20%. These performances stood out even as broader equity markets delivered moderate gains.

The rally in state-run bank stocks was driven by a favourable macro backdrop. Falling interest rates, improved liquidity conditions and relatively attractive valuations helped state-owned lenders outperform their private-sector peers.

Auto stocks benefited from steady improvement in vehicle demand and a recovery in consumer sentiment, while ...