Over 100 equity mutual funds have offered market-beating returns in the last one year, outperforming the benchmark indices- Nifty50 and BSE Sensex, an analysis by ETMutualFunds showed. The benchmark indices - Nifty 50 and BSE Sensex - lost 1.19% and 1.12% respectively in the said time period.
Around 273 equity mutual funds have completed one year of existence in the market, of which 105 equity funds outperformed Nifty50 and BSE Sensex in the same time period even while some lost less than the indices.
Also Read | International mutual funds offer 20% average return in 1 year amid RBI restrictions. Should one diversify abroad or stay domestic?
The market experts believe that with large, mid, and small cap indices delivering muted or negative returns in the last one year, this outperformance was not due to a broad based market rally, instead it came from selective stock picking and exposure to specific sectors that bucked the trend.
“The outperformance was not due to a broad-based market rally, as large, mid, and small-cap indices themselves remained muted or negative in the last one year. Instead, it came from selective active stock-picking and exposure to specific sectors that bucked the trend. While this highlights the strength of active management, such outcomes are not guaranteed every year, and consistency across cycles will matter more than chasing short-term winners,” Sagar Shinde, VP of Research at Fisdom, shared with ETMutualFunds.
In the last one year, Nifty Microcap 250 - TRI lost 7.13% whereas Nifty Midcap 150 - TRI lost 2.39%. Nifty Smallcap 250 - TRI went down by 6.85% in the last one year. In 2025 so far, Nifty Microcap 250 - TRI went down by 7.08% whereas Nifty Smallcap 250 - TRI went down by 5.28%.
In the last six months, BSE Sensex and Nifty 50 gained 8.28% and 9.59% respectively. In the current calendar year, the indices gained 3.38% and 4.51% respectively.
As the markets are at elevated levels now, should one consider investing in these funds now or hold on the investments for a correction? The expert recommends that investment decisions should not be made solely on trailing returns, as fund rankings change every year.
“Instead, investors should focus on consistency of performance across market cycles before committing capital. Given that markets are at elevated levels, SIPs or STPs are more suitable than lump sum investments, as they help manage volatility and average out costs. The positioning of the fund within a portfolio is equally important, and the choice should always align with the investor’s overall asset allocation and risk profile. This ensures disciplined investing without relying on market timing,” Shinde recommends.
Two funds delivered double-digit returns. Motilal Oswal Multi Cap Fund offered the highest return of 16.43% in the last one year. The next two funds were from Invesco India Mutual Fund. Invesco India Midcap Fund and Invesco India Large & Mid Cap Fund offered 11.24% and 9.25% returns respectively.
Two flexi cap funds - HDFC Flexi Cap Fund and Parag Parikh Flexi Cap Fund - delivered 6.20% and 6.08% returns respectively in the said time period. Mirae Asset Focused Fund offered a return of 3.72% in the said time horizon.
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Two funds from ICICI Prudential Mutual Fund - ICICI Pru Large Cap Fund and ICICI Pru Midcap Fund - offered a return of 1.21% and 1.13% respectively in the similar time horizon. ITI Focused Fund was the last one to offer positive returns as the fund gave 0.01% in the same time period.
Around 27 funds lost less than the benchmark indices in the last one year. Union Flexi Cap Fund lost 1.08% in the said period. PGIM India Small Cap Fund lost the lowest of around 0.18% in the similar period.
Post looking at the outperformers, do funds that beat the market in the short term always turn out to be the best options for long-term wealth creation?
According to the expert, not necessarily the fund that beats the market in the short term always turns out to be the best option for long-term wealth creation as a fund that tops the charts in one year may underperform in subsequent years if its strategy is cyclical or concentrated in sectors that lose favor and long-term wealth creation requires consistency, risk management, and alignment with an investor’s time horizon.
“At present, diversified equity categories such as flexi-cap, multi-cap, and largecap funds are better positioned for stability while capturing growth opportunities. Investors with higher risk appetite may selectively add mid-cap or small-cap exposure, but core portfolios should remain anchored in broader, diversified categories,” Shinde said.
A further analysis of the performance of sectoral and thematic funds showed that around 130 funds have outperformed the benchmark indices. These 130 sectoral and thematic funds gave returns ranging between -0.87% to 81.49% in the last one year.
In comparison to diversified equity mutual funds, more sectoral and thematic funds have outperformed the benchmark indices. Does that indicate that investors can take selective exposure in sectoral or thematic funds that have outperformed the benchmark indices?
Also Read | 8 equity mutual funds failed to outperform their benchmarks in 3 years
The expert is of the opinion that for most investors, diversified equity funds should form the core portfolio, as they provide balanced exposure across sectors and reduce concentration risk and sectoral and thematic funds can deliver outsized returns when their theme is in favor, but they also carry higher volatility and timing risk.
He further recommends that selective exposure (5–15% of the portfolio) to well-researched themes such as capital markets, manufacturing, or financial services can be considered for investors who understand sector cycles and can handle drawdowns. However, the bulk of long-term wealth creation should come from diversified equity funds where fund managers have the flexibility to allocate across opportunities.”
One should always consider their risk appetite, investment horizon, and goals before making any investment decisions.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and Twitter handle.
Around 273 equity mutual funds have completed one year of existence in the market, of which 105 equity funds outperformed Nifty50 and BSE Sensex in the same time period even while some lost less than the indices.
Also Read | International mutual funds offer 20% average return in 1 year amid RBI restrictions. Should one diversify abroad or stay domestic?
The market experts believe that with large, mid, and small cap indices delivering muted or negative returns in the last one year, this outperformance was not due to a broad based market rally, instead it came from selective stock picking and exposure to specific sectors that bucked the trend.
“The outperformance was not due to a broad-based market rally, as large, mid, and small-cap indices themselves remained muted or negative in the last one year. Instead, it came from selective active stock-picking and exposure to specific sectors that bucked the trend. While this highlights the strength of active management, such outcomes are not guaranteed every year, and consistency across cycles will matter more than chasing short-term winners,” Sagar Shinde, VP of Research at Fisdom, shared with ETMutualFunds.
In the last one year, Nifty Microcap 250 - TRI lost 7.13% whereas Nifty Midcap 150 - TRI lost 2.39%. Nifty Smallcap 250 - TRI went down by 6.85% in the last one year. In 2025 so far, Nifty Microcap 250 - TRI went down by 7.08% whereas Nifty Smallcap 250 - TRI went down by 5.28%.
In the last six months, BSE Sensex and Nifty 50 gained 8.28% and 9.59% respectively. In the current calendar year, the indices gained 3.38% and 4.51% respectively.
As the markets are at elevated levels now, should one consider investing in these funds now or hold on the investments for a correction? The expert recommends that investment decisions should not be made solely on trailing returns, as fund rankings change every year.
“Instead, investors should focus on consistency of performance across market cycles before committing capital. Given that markets are at elevated levels, SIPs or STPs are more suitable than lump sum investments, as they help manage volatility and average out costs. The positioning of the fund within a portfolio is equally important, and the choice should always align with the investor’s overall asset allocation and risk profile. This ensures disciplined investing without relying on market timing,” Shinde recommends.
Two funds delivered double-digit returns. Motilal Oswal Multi Cap Fund offered the highest return of 16.43% in the last one year. The next two funds were from Invesco India Mutual Fund. Invesco India Midcap Fund and Invesco India Large & Mid Cap Fund offered 11.24% and 9.25% returns respectively.
Two flexi cap funds - HDFC Flexi Cap Fund and Parag Parikh Flexi Cap Fund - delivered 6.20% and 6.08% returns respectively in the said time period. Mirae Asset Focused Fund offered a return of 3.72% in the said time horizon.
Also Read | Lucky 13! Invesco India Midcap Fund and HDFC Small Cap Fund among equity mutual funds which deliver over 20% return in 6 months
Two funds from ICICI Prudential Mutual Fund - ICICI Pru Large Cap Fund and ICICI Pru Midcap Fund - offered a return of 1.21% and 1.13% respectively in the similar time horizon. ITI Focused Fund was the last one to offer positive returns as the fund gave 0.01% in the same time period.
Around 27 funds lost less than the benchmark indices in the last one year. Union Flexi Cap Fund lost 1.08% in the said period. PGIM India Small Cap Fund lost the lowest of around 0.18% in the similar period.
Post looking at the outperformers, do funds that beat the market in the short term always turn out to be the best options for long-term wealth creation?
According to the expert, not necessarily the fund that beats the market in the short term always turns out to be the best option for long-term wealth creation as a fund that tops the charts in one year may underperform in subsequent years if its strategy is cyclical or concentrated in sectors that lose favor and long-term wealth creation requires consistency, risk management, and alignment with an investor’s time horizon.
“At present, diversified equity categories such as flexi-cap, multi-cap, and largecap funds are better positioned for stability while capturing growth opportunities. Investors with higher risk appetite may selectively add mid-cap or small-cap exposure, but core portfolios should remain anchored in broader, diversified categories,” Shinde said.
A further analysis of the performance of sectoral and thematic funds showed that around 130 funds have outperformed the benchmark indices. These 130 sectoral and thematic funds gave returns ranging between -0.87% to 81.49% in the last one year.
In comparison to diversified equity mutual funds, more sectoral and thematic funds have outperformed the benchmark indices. Does that indicate that investors can take selective exposure in sectoral or thematic funds that have outperformed the benchmark indices?
Also Read | 8 equity mutual funds failed to outperform their benchmarks in 3 years
The expert is of the opinion that for most investors, diversified equity funds should form the core portfolio, as they provide balanced exposure across sectors and reduce concentration risk and sectoral and thematic funds can deliver outsized returns when their theme is in favor, but they also carry higher volatility and timing risk.
He further recommends that selective exposure (5–15% of the portfolio) to well-researched themes such as capital markets, manufacturing, or financial services can be considered for investors who understand sector cycles and can handle drawdowns. However, the bulk of long-term wealth creation should come from diversified equity funds where fund managers have the flexibility to allocate across opportunities.”
One should always consider their risk appetite, investment horizon, and goals before making any investment decisions.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@timesinternet.in alongwith your age, risk profile, and Twitter handle.
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