Top-performing equity mutual funds in large-caps, mid-caps, and other categories

Equities have revolutionized the way wealth generation is accessible to everyone. Investing in shares is most conveniently done through equity mutual funds. The Securities and Exchange Board of India (SEBI) established various fund categories in 2017 based on investment styles and mandates. This system enables investors to easily compare different funds. To simplify the process further, an independent jury collaborated on the selection of the best funds in Large-Cap, Mid-Cap, and Small-Cap segments using the SEBI classification. Additionally, to encompass funds that cross various market capitalizations like Flexi-cap, Multi-cap, Value, ELSS, Large & Mid-cap, and Focus, they included them in an All Cap category. This extensive analysis benefits from a partnership with Morningstar.

Large-cap funds are significant players in the equity market as they are required to invest a minimum of 80% of their assets in the top 100 companies based on market capitalization. Accounting for 12% of equity fund assets, these funds are vital for providing stability, liquidity, and acting as a buffer in volatile market conditions. Vikram Singhvee, co-founder of Venn Wealth, emphasizes the importance of selecting the right fund manager to achieve investment success. A noticeable performance gap can be seen by comparing the category average returns and the benchmark Nifty 100 TRI performance. Over one, three, and five-year periods, the category average returns are 33.43%, 13.04%, and 16.46%, respectively, versus the Nifty100 TRI’s returns of 32.97%, 13.13%, and 17.04% (as of October 31, 2024). Among the top three large-cap funds are Nippon India Large Cap, ICICI Prudential Bluechip, and HDFC Top 100. While these funds share a similar investment universe, each fund manager follows a distinct investment strategy. For instance, the focus of Nippon India Large Cap is on investing in growing businesses at reasonable valuations.

The mid-cap category is known for its potential to provide significant returns albeit with higher risks compared to large-cap funds. These funds must invest at least 65% of their assets in mid-cap stocks. Over the past few years, mid-cap funds have demonstrated a robust performance, with the category average returns for one, three, and five-year periods standing at 40.32%, 13.92%, and 17.4%, respectively. This is in contrast to the Nifty Midcap 100 TRI performing at 35.18%, 15.58%, and 17.33% during the same periods. The three best mid-cap funds identified are Axis Midcap, DSP Midcap, and Kotak Emerging Equity. Each of these funds has its unique approach to mid-cap investing – whether through increasing market exposure, superior stock selection capabilities, or a blend of both strategies.

Investors looking for aggressive growth opportunities often turn to small-cap funds. These funds are mandated to invest at least 65% of their assets in small-cap stocks. Despite being among the riskiest, small-cap funds have the potential for significant growth. Analyzing their performance, these funds delivered an average return of 54.42% for one year, 11.73% for three years, and 14.75% for five years. In comparison, the S&P BSE SmallCap TRI performed at 56.99%, 14.07%, and 17.35% during the same periods. The top three small-cap funds include HDFC Small Cap, SBI Small Cap, and Nippon India Small Cap. Each of these funds follows a unique investment strategy, emphasizing different aspects such as strong stock picking, diversification, and risk management practices.

The equity mutual fund landscape in India is vast and varied, offering a multitude of opportunities for investors seeking exposure to different market segments. Depending on an investor’s risk appetite, investment horizon, and return expectations, selecting the right mutual fund category and fund manager plays a crucial role in achieving investment success. By understanding the distinct features and performance characteristics of large-cap, mid-cap, and small-cap funds, investors can make well-informed decisions to effectively grow their investment portfolios.