Five active mutual funds delivered returns that exceeded their respective benchmark indices in 2026, according to fund performance data. The outperforming funds span across different market capitalizations and fund categories, demonstrating the potential for active management to generate alpha in various market conditions. This performance highlights the effectiveness of active fund management strategies across different investment approaches.
The Equity Linked Savings Scheme (ELSS) category showed particularly strong performance with one fund achieving benchmark-beating returns. ELSS funds are tax-saving equity schemes that offer dual benefits of capital appreciation potential and tax deductions under Section 80C of the Income Tax Act. These funds have demonstrated their ability to deliver superior returns while providing tax advantages to investors.
Small-cap funds emerged as the standout performers, with the average active small-cap fund delivering an impressive 20.1% CAGR compared to 16.1% for the Nifty Smallcap 250 TRI benchmark, according to Capitalmind Financial Services Private Limited analysis. The return gap of 4 percentage points represents the widest outperformance across all categories. Small-cap funds, which invest in companies ranked 251st and beyond by market capitalization, offer higher growth potential with the ability to capture emerging business opportunities in the market. The Bajaj Finserv Small Cap Fund exemplifies this category, following a research-backed investment approach focusing on company fundamentals, governance practices, business sustainability, and valuation discipline while actively monitoring portfolio risks.
Mid-cap funds generated a CAGR of 18.5%, slightly outperforming their benchmark index with a 18.3% CAGR, as reported by Capitalmind Financial Services Private Limited. The performance gap of 0.2 percentage points demonstrates the effectiveness of active management in this category. Flexi-cap funds also recorded strong performance with an average CAGR of 15.2% against 13.6% for the Nifty 500 TRI benchmark, showing the benefits of diversified investment approaches across market capitalizations.
Active funds demonstrated superior risk management capabilities across all categories, with maximum drawdowns consistently lower than benchmark indices. The small-cap category showed the most significant improvement, with average active funds experiencing a maximum drawdown of 44.2% compared to 59.8% for the benchmark. In the mid-cap segment, active funds fell 35.8% at their worst versus 43.1% for the benchmark, while large-cap active funds recorded a maximum drawdown of 35% versus 37.9% for the benchmark. This superior downside protection indicates that active management can effectively navigate market corrections while maintaining growth potential.
