Best Mutual Funds: Top Performing Equity Schemes Across Market Caps in the Past Year
Mutual Funds In the past year, the equity markets have shown remarkable resilience amid global economic uncertainties, rising interest rates, and fluctuating energy prices. This robust performance has translated into handsome returns for many mutual fund investors. Particularly, equity mutual funds that invest across market capitalizations—large-cap, mid-cap, small-cap, and multi-cap—have delivered stellar returns, making them a topic of keen interest among retail and institutional investors alike.
This comprehensive blog explores the best-performing mutual funds of the past year, their investment strategies, and whether they could be a part of your portfolio.
Mutual Fund Categories and Market Caps
Before diving into the list of top performers, it’s essential to understand the categories and how market capitalization influences fund performance.
1. Large-Cap Funds
- Definition: Invest primarily in top 100 companies by market capitalization.
- Characteristics: Relatively stable, lower risk, steady returns.
- Example: Blue-chip companies like Reliance Industries and TCS often dominate these portfolios.
2. Mid-Cap Funds
- Definition: Focus on companies ranked between 101 and 250 by market capitalization.
- Characteristics: Higher growth potential but also higher risk compared to large-cap funds.
3. Small-Cap Funds
- Definition: Invest in companies beyond the top 250 in market capitalization.
- Characteristics: High-risk, high-reward investments; tend to perform exceptionally well in bullish markets.
4. Multi-Cap Funds
- Definition: Invest across all market capitalizations, offering diversification.
- Characteristics: Balanced risk-reward profile, suitable for most investors.
5. Flexi-Cap Funds
- Definition: Like multi-cap funds but with no fixed allocation to any market cap segment.
- Characteristics: Highly flexible, allowing fund managers to seize opportunities dynamically.
Top-Performing Mutual Funds in the Last Year
Large-Cap Funds
Large-cap funds delivered moderate yet consistent returns over the past year, driven by strong performances from sectors like banking, IT, and consumer goods.
- ABC Large-Cap Equity Fund
- 1-Year Return: 14.5%
- Top Holdings: HDFC Bank, Infosys, ICICI Bank
- Strategy: Focused on financially sound companies with a proven track record.
- XYZ Bluechip Fund
- 1-Year Return: 13.8%
- Top Holdings: Reliance Industries, Tata Consultancy Services, Larsen & Toubro
- Strategy: Conservative approach emphasizing market leaders.
Mid-Cap Funds
Mid-cap funds shone brightly as mid-sized companies capitalized on post-pandemic recovery and domestic demand.
- DEF Mid-Cap Growth Fund
- 1-Year Return: 21.2%
- Top Holdings: PI Industries, Page Industries, AU Small Finance Bank
- Strategy: High-growth companies with strong fundamentals.
- LMN Mid-Cap Equity Fund
- 1-Year Return: 20.6%
- Top Holdings: Ashok Leyland, Crompton Greaves, Indian Hotels Company
- Strategy: Balanced allocation across emerging sectors like hospitality and industrial goods.
Small-Cap Funds
Small-cap funds emerged as star performers, thanks to their ability to tap into niche opportunities and sectors showing exponential growth.
- GHI Small-Cap Value Fund
- 1-Year Return: 30.4%
- Top Holdings: KPIT Technologies, Deepak Nitrite, Tata Elxsi
- Strategy: Value-oriented investments in underappreciated small-cap companies.
- PQR Emerging Small-Cap Fund
- 1-Year Return: 28.9%
- Top Holdings: IRCTC, APL Apollo Tubes, Navin Fluorine
- Strategy: Growth-focused companies in emerging industries.
Multi-Cap Funds
The multi-cap category leveraged its diversified approach to mitigate risks while delivering healthy returns.
- JKL Multi-Cap Opportunities Fund
- 1-Year Return: 18.5%
- Top Holdings: Reliance Industries, Bharat Forge, Bajaj Finance
- Strategy: Allocation across large, mid, and small caps to balance risk and reward.
- STU Dynamic Multi-Cap Fund
- 1-Year Return: 17.8%
- Top Holdings: Infosys, Maruti Suzuki, HDFC Bank
- Strategy: Active rebalancing based on market conditions.
Flexi-Cap Funds
Flexi-cap funds benefited from their nimble approach, enabling fund managers to pivot strategies as needed.
- NOP Flexi-Cap Growth Fund
- 1-Year Return: 19.2%
- Top Holdings: ICICI Bank, Tata Motors, Adani Enterprises
- Strategy: Opportunistic investments in trending sectors.
- VWX Flexi-Cap Equity Fund
- 1-Year Return: 18.7%
- Top Holdings: SBI, Larsen & Toubro, Asian Paints
- Strategy: Diversified across cyclical and defensive sectors.
Why Did These Funds Perform Well?
Several factors contributed to the success of these equity mutual funds:
- Sectoral Tailwinds: Sectors like banking, IT, and auto benefited from domestic economic recovery and global demand.
- Stock Selection: Fund managers picked high-quality stocks with strong earnings growth.
- Market Sentiment: Positive investor sentiment and liquidity in the markets played a crucial role.
- Geopolitical Stability: Relative stability in the global geopolitical landscape encouraged foreign and domestic investments.
Should You Invest in These Mutual Funds?
While past performance is a useful indicator, it is not a guarantee of future returns. Here are a few factors to consider before investing:
1. Financial Goals
- Align your investments with your long-term financial goals.
- For instance, small-cap funds might suit aggressive investors aiming for higher returns over a 5-10 year horizon.
2. Risk Appetite
- Large-cap funds are ideal for conservative investors.
- Mid and small-cap funds are better suited for those willing to take higher risks.
3. Time Horizon
- Equity mutual funds generally require a long-term horizon (5+ years) to mitigate market volatility.
4. Diversification
- Avoid over-concentration in a single category or sector.
- Consider multi-cap or flexi-cap funds for balanced exposure.
5. Fund Manager Expertise
- Evaluate the track record and strategy of the fund manager.
Tax Implications
Equity mutual funds attract capital gains tax based on the holding period:
- Short-Term Capital Gains (STCG): For investments held less than 1 year, a 15% tax is applicable.
- Long-Term Capital Gains (LTCG): Gains over ₹1 lakh for investments held longer than 1 year are taxed at 10%.
Conclusion
The past year has been rewarding for mutual fund investors, particularly those invested in equity schemes across market caps. While the returns from top-performing funds are impressive, it’s crucial to evaluate your financial objectives, risk tolerance, and time horizon before making investment decisions.
As you assess these funds, remember that diversification, consistent monitoring, and long-term commitment are the keys to building a successful portfolio. Whether you already own any of these mutual funds or are considering them for future investments, staying informed and disciplined will ensure that your investments align with your goals.
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