More than 100 Indian equity mutual funds have delivered absolute returns of at least 100% over five years, with 4 funds achieving this feat in just 3 years. According to The Economic Times, excluding international funds, 101 out of 310 equity schemes with five-year track records generated these impressive returns. However, recent performance has shown significant weakness, with several top performers delivering poor returns over the past two years. Aditya Birla Sun Life PSU Equity Fund declined 0.93% over two years despite its 179% five-year return, while Invesco India PSU Equity Fund lost 7.49% over the shorter period despite a 160.68% five-year gain.
The best performing funds included Aditya Birla Sun Life PSU Equity Fund with 179% returns, DSP India TIGER Fund at 176.51%, and Nippon India Power & Infrastructure Fund at 174%. Motilal Oswal Midcap Fund was the highest-ranked diversified mid-cap offering with 172% returns. In the three-year category, HDFC Defence Fund led with 174.11% returns, while Bandhan Small Cap Fund followed with 106% and Quant BFSI Fund returned 101.73%. As reported by The Economic Times, defence, infrastructure, financial services, small-cap, PSU and healthcare strategies dominated the rankings during this period.
The earlier outperformance was attributed to policy support and earnings growth, according to Feroze Azeez, Joint CEO at Anand Rathi Wealth. Defence and infrastructure companies benefited from sustained government capital expenditure, including a record ₹1.8 lakh crore capital allocation for the defence ministry in FY26 and spending under the National Infrastructure Pipeline. Healthcare gained from India's expanding role as a global pharmaceutical manufacturing hub, rising exports and production-linked incentives. PSU and small-cap stocks also rallied as corporate earnings improved, as reported by The Economic Times.
Despite favourable long-term drivers remaining, experts caution against assuming previous winners will continue their strong performance. Chandraprakash Padiyar from Tata Asset Management noted that the current earnings cycle remains relatively early, with scope for companies whose earnings potential is yet to be fully reflected in valuations. Shridatta Bhandwadar from Canara Robeco considers valuations of 17-17.5 times estimated FY28 earnings reasonable compared with historical levels. For most retail investors, fund managers recommend diversified equity funds over concentrated sector bets, citing attractive valuations and long-term opportunities despite near-term market volatility.
