If you’ve looked at mutual fund returns lately, you’ve probably noticed two categories dominating the charts: PSU (Public Sector Undertaking) and Infrastructure funds.
With eye-popping 3-year and 5-year Compound Annual Growth Rates (CAGR), it is easy to feel a sense of FOMO (Fear Of Missing Out). Many investors are asking the exact same question right now: “Are we at the peak, or is there still time to start a Systematic Investment Plan (SIP) in these funds?”
Before you hit the “invest” button, let’s break down exactly what is driving this rally, the hidden risks, and how to approach thematic funds in 2026 without wrecking your long-term wealth creation.
Why Are PSU and Infrastructure Funds Booming?
To understand if the rally has steam left, we first need to understand why it started. The surge isn’t just luck; it is backed by solid macroeconomic shifts:
- Massive Government Capex: The central government has consistently pumped trillions of rupees into roads, railways, defense, and power over the last few budget cycles. Infrastructure companies are sitting on record-high order books.
- The Turnaround of PSUs: A decade ago, PSUs were often associated with inefficiency and high debt. Today, government-backed banks and defense contractors have cleaned up their balance sheets, improved profit margins, and started rewarding shareholders with hefty dividends.
- Domestic Consumption: As India continues its push to become a global manufacturing hub, the demand for power, logistics, and raw materials has skyrocketed.
The Big Question: Is It Too Late to Start a SIP Now?
The short answer: It is not necessarily too late, but your expectations need a reality check. Here is the golden rule of investing that every retail investor needs to remember: Thematic and sectoral funds are highly cyclical. They do not move in a straight line forever.
When you look at the 40% or 50% returns of 2024 and 2025, you are looking in the rearview mirror. Markets are forward-looking. Because these sectors have already experienced a massive run-up, their valuations (the price you pay for the earnings) are no longer cheap.
If you start a SIP today expecting the exact same returns over the next three years, you might be setting yourself up for disappointment.
How to Safely Invest in Thematic Funds (The Core & Satellite Strategy)
If you strongly believe that the infrastructure and PSU stories will continue to play out over the next 5 to 7 years, you can absolutely include them in your portfolio. But you must use the Core and Satellite approach.
- The Core (80% of your portfolio): This should consist of diversified, all-weather funds. Think Flexi-Cap, Large-Cap, or broad Index Funds. These funds give you exposure to multiple sectors (Banking, IT, Pharma, FMCG) and protect you if one specific sector crashes.
- The Satellite (10% to 20% of your portfolio): This is where you can take higher risks for higher rewards. You can allocate a small portion of your SIPs to a PSU or Infrastructure fund here.
By keeping your exposure limited, a sudden downturn in the infrastructure sector won’t wipe out your primary financial goals.
Beware the Tax Trap of Chasing Returns
A common mistake investors make in 2026 is stopping their long-running SIPs in perfectly good Flexi-Cap funds to chase the recent high returns of PSU funds.
Frequently jumping between funds hurts your compounding and triggers taxes. Remember the mutual fund taxation rules:
- STCG (Short-Term Capital Gains): If you sell your equity mutual fund units before holding them for 1 year, you are taxed at 15%.
- LTCG (Long-Term Capital Gains): If you sell after 1 year, gains above ₹1 Lakh are taxed at 10%.
Switching funds reacting to market noise means paying unnecessary taxes and exit loads.
The Final Verdict
Starting a SIP in a PSU or Infrastructure fund in 2026 is not a bad idea, provided you have a time horizon of at least 5 to 7 years and you are okay with high volatility. They are fantastic wealth creators during economic upcycles.
However, they should never be the foundation of your portfolio. Build your base with diversified equity funds, and only use thematic funds as a strategic booster.
Want to analyze your current portfolio or figure out the right SIP amount for your goals? Explore the free financial calculators here on Wealth Nerve to get started!
Trust Signals & References :
- Data References: AMFI (Association of Mutual Funds in India) category average returns for Sectoral/Thematic funds.
- Macro Trends: RBI (Reserve Bank of India) bulletins on banking sector health and Government of India Budget documents regarding capital expenditure allocations. * Regulatory Reminder: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Always consult with a SEBI-registered professional before making concentrated sectoral bets.