Recent analysis by Kuvera highlights that while small- and mid-cap funds have outperformed over five years, a focus on low-cost passive large-cap funds remains a prudent strategy for long-term investors. The evolving landscape underscores the importance of category choice over brand names or short-term ratings.
Every year brings a fresh wave of “best mutual funds” lists, but many become stale almost as soon as they are published. That is why investors are usually better served by understanding fund categories and risk profiles than by fixating on a single leaderboard. The latest SIP rankings, as compiled by Kuvera, underline a familiar truth: category choice often matters more than brand names or short-term star ratings.
Over the past five years, small-cap and mid-cap funds have dominated the SIP charts. Kuvera’s analysis showed that nine of the 10 best performers came from those two categories, with annualised SIP returns above 20% in the strongest cases. Bandhan Small Cap Fund led the small-cap segment, while funds from ITI, Invesco India and Bank of India also featured prominently. In the mid-cap space, Invesco India Mid Cap, HSBC Midcap, Edelweiss Midcap, ICICI Prudential Midcap and Mahindra Manulife Midcap were among the standouts. Mint’s own review of equity SIP performance reached a similar conclusion, saying small-cap and mid-cap schemes have led the pack across three, five and 10-year periods.
Large-cap funds, by contrast, were notably absent from the top tier of the five-year list. According to Kuvera, no actively managed large-cap fund made the top 10, and the best of the lot ranked only 10th among 64 schemes. The top nine places in that category were taken by index funds and exchange-traded funds, reinforcing the case for low-cost passive investing in core large-cap allocations. That pattern is consistent with broader commentary from Mint, which found that index-style products have increasingly outpaced many active large-cap peers.
Flexi-cap funds also stood out for their consistency. Kuvera said Quant Flexi Cap Fund delivered a 26.18% one-year SIP return, while ITI Flexi Cap Fund and Bank of India Flexi Cap Fund also outperformed the category average. Over 10 years, large- and mid-cap funds showed their own staying power: Invesco India Large & Mid Cap Fund topped that list with a 19.02% annualised SIP return, followed by Quant, Bandhan and ICICI Prudential. The category’s decade-long average return was more than 14%, ahead of the BSE LargeMidcap Total Return Index, according to Kuvera.
The practical lesson is not to chase last year’s winners. Small-cap and mid-cap funds have rewarded investors handsomely, but they have also been volatile and sensitive to market cycles. Expense ratios matter too, because seemingly small differences can compound into a meaningful drag over a long holding period. For a core portfolio, a large-cap index fund or a steady flexi-cap fund is often a sensible starting point, with mid-cap or large- and mid-cap funds for investors seeking more growth. Kuvera also highlighted tax-saving ELSS funds and warned against using sectoral or thematic funds as the backbone of a SIP plan, a view that aligns with broader fund-selection guides such as Kiplinger’s emphasis on long-term discipline, diversification and costs.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
