53% Equity Mutual Funds Underperform Their Benchmarks Over Five Years

More than half of equity mutual funds delivered lower returns than their benchmark index in the last five years. As many as 53.33 per cent actively-managed equity mutual funds underperformed their respective benchmarks over the five-year period, according to data from Ace Mutual Funds as on January 16, 2026.

For the analysis, we considered equity mutual fund schemes that have completed at least a five-year track record in the categories, including large-cap funds, mid-cap, small-cap, large & mid-cap, flexi-cap, multi-cap, value funds, contra funds, dividend-yield funds and focused funds. We considered trailing annualised returns for the five-year period. After applying these filters, we got 180 funds across categories.

According to the data, stress was most visible in the Mid Cap Fund category. Of the 24 mid-cap funds with a complete five-year history, 17 funds underperformed, translating to an underperformance rate of 70.83 per cent. Several schemes delivered strong absolute returns but still lagged the benchmark by wide margins. For instance, Aditya Birla SL Midcap Fund generated a five-year return of 27.89 per cent, while the Nifty Midcap 150 TRI delivered 35.20 per cent. Baroda BNP Paribas Mid Cap Fund returned 29.11 per cent, also falling more than six percentage points short of the same benchmark.

Before we move further, it is important to understand that this analysis should be used for information purposes only. The analysis has been done using trailing returns that show point-to-point returns. It fails to reflect the consistency of performance of a fund. Also, the fund names have been taken to showcase the analysis results. Readers should not base their investment decisions or treat the funds mentioned here as recommendations in any way.

Coming back to the analysis, a similar pattern is evident in Large & Mid Cap Funds, where 18 out of 26 schemes, or 69.23 per cent, underperformed over five years, as shown in the data from Ace MF. Axis Large & Mid Cap Fund posted a return of 24.08 per cent, compared with a benchmark return of 26.17 per cent. Canara Robeco Large and Mid Cap Fund, with 19.93 per cent, lagged the benchmark by an even wider margin.

The Flexi Cap Fund category, which allows freedom to fund managers to invest across market capitalisations, also showed meaningful underperformance. Of the 24 flexi-cap funds analysed, 14 underperformed, or 58.33 per cent. Axis Flexi Cap Fund delivered a five-year return of 14.27 per cent, significantly below its benchmark return of 21.41 per cent. Aditya Birla SL Flexi Cap Fund returned 20.35 per cent, missing its benchmark of 23.10 per cent.

Within the same category, however, the data shows some exceptions. Parag Parikh Flexi Cap Fund, the largest actively managed mutual fund scheme in the country, delivered a five-year annualised return of 27.91 per cent, outperforming its NIFTY 500 TRI benchmark return of 21.41 per cent by 6.49 percentage points. The performance is particularly significant given the fund’s size. The scheme manages assets worth Rs 1.33 lakh crore as of December 31, 2025, making it the only actively managed equity fund in India with assets above Rs 1 lakh crore.

Underperformance was also widespread in Large Cap Funds. Of the 27 large-cap schemes with a complete five-year history, 15 underperformed, resulting in an underperformance rate of 55.56 per cent. Axis Large Cap Fund delivered a return of 11.59 per cent, while its benchmark returned 17.78 per cent. Edelweiss Large Cap Fund, at 17.75 per cent, narrowly missed its benchmark return of 18.18 per cent.

Some Equity Funds That Outperformed

Despite the widespread underperformance, several funds delivered decisive benchmark outperformance. In the Small Cap category of funds, Bandhan Small Cap Fund delivered a five-year return of 39.41 per cent, outperforming its benchmark by 16.34 percentage points. Invesco India Smallcap Fund followed 38.97 per cent, also beating its benchmark by a wide margin.

Among Focused Funds, HDFC Focused Fund gave 36.25 per cent, exceeding its benchmark by 14.84 percentage points, while ICICI Prudential Focused Equity Fund returned 30.13 per cent, outperforming by 12.35 percentage points. HDFC Flexi Cap Fund also stood out with a five-year return of 34.16 per cent, beating its benchmark by 12.74 percentage points.