Thematic ETFs Outperform Broad Market Indices
Over the past five years, sector-specific and thematic Exchange-Traded Funds (ETFs) have emerged as significant wealth creators, delivering superior long-term returns compared to diversified broad-market index funds. Data compiled by AdvisorKhoj, as of July 27, 2026, highlights that ETFs concentrating on central public sector enterprises (CPSEs), Public Sector Undertaking (PSU) banks, and global technology companies have substantially outpaced general market benchmarks.
While most Nifty 50 ETFs recorded annualized returns of approximately 10% over this period, investors in select government-owned companies, PSU banks, and international technology stocks saw considerably higher gains, despite market volatility.
Top Performing ETFs Over Five Years
Leading the pack was the CPSE ETF, which generated an impressive annualized return of 29.96%. This fund invests in a diverse portfolio of central public sector enterprises across vital sectors such as energy, power, and engineering.
Closely following was the Nippon India ETF Nifty PSU Bank BeES, with an annualized return of 28.76%. This stellar performance reflects a remarkable turnaround for state-owned banks, driven by improved balance sheets, reduced bad loans, enhanced profitability, and robust credit growth.
Global technology also proved to be a powerful theme, with the Mirae Asset NYSE FANG+ ETF securing the third spot, delivering a 24.72% annualized return. This fund provides exposure to some of the world's largest technology companies, benefiting from the sustained rally fueled by advancements in cloud computing, artificial intelligence, and broader digital transformation.
Other top performers included the Bharat 22 ETF, which posted a 23.49% annualized return, and the Motilal Oswal Nasdaq 100 ETF, completing the top five with a 19.52% return.
Why PSUs and Global Tech Dominated
The exceptional performance of CPSE, Bharat 22, and PSU Bank ETFs underscores a major investment trend in India's equity markets. Government-owned companies have seen a significant re-rating due to improvements in corporate governance, higher profitability, consistent dividend payouts, and renewed investor confidence.
Concurrently, international technology-focused ETFs capitalized on the robust growth of US technology giants. Artificial intelligence, in particular, has been a key catalyst, driving both earnings growth and market valuations for these firms.
Considerations for Long-Term Investors
While some of these top-performing ETFs have experienced sharp fluctuations, their five-year returns emphasize the benefits of maintaining a long-term investment horizon through various market cycles. The data also suggests that strategic diversification across different geographies and investment themes can significantly enhance overall portfolio returns.
However, financial advisors caution that thematic and sectoral ETFs typically carry higher volatility than more diversified index funds. Investors are advised to align such allocations with their individual risk appetite, investment horizon, and overall asset allocation strategy, rather than simply chasing recent market winners.