Best Mutual Funds To Invest In 2025 India- Best Performing Mutual Funds
Over the years in India, mutual funds have tremendously grown; due to this, the best performing mutual funds in the market are constantly changing. To judge the mutual funds schemes, the financial experts have established various rating systems such as CRISIL, Morning Star, and ICRA. These systems evaluate all the funds based on qualitative and quantitative factors like returns, asset size, expense ratio, Standard Deviation, etc. It's the synopsis of all these factors that leads to the rating of the best performing mutual funds in India. Some of the top-ranked funds from different categories like large-, mid-, small-, multi-cap, ELSS, and sectoral funds will be named in this blog from which you can select and invest in.
To make the investing process easier for the investors, Fintra has shortlisted some of the best performing mutual funds in India along with the guidelines of how to choose the best fund. The topics we will highlight are:
- What are Mutual Funds and Who Should Invest in Them?
- Why Invest in Mutual Funds?
- The Advantages of Investing in Mutual Funds
- The Risk Possessed by Mutual Funds
- The List of The Best Equity Mutual Funds 2025
- The Different Types of Mutual Funds to Invest
- How to Pick the Top Performing Mutual Funds?
What are Mutual Funds and Who Should Invest in Them?
A mutual fund is a type of financial vehicle which is formed when an asset management company (AMC) pools investments from several investors to invest in securities such as stocks, bonds, money market instruments, and other assets. To manage or operate the pooled investment/mutual funds, the AMCs have fund managers who're professionals. These finance professionals have an exceptional track record of managing a portfolio of investments. They allocate the fund's assets in an attempt to produce capital gains or income for the fund's investors. Moreover, the mutual fund's portfolio is structured and sustained to match the investment objectives stated in its prospectus.
Every mutual fund investor is assigned with fund units corresponding to its quantum of investment. These investors are permitted to buy or redeem fund units only at the prevailing net asset value (NAV). The NAV of mutual funds varies daily as it depends on the performance of the underlying assets. Since the Securities and Exchange Board of India (SEBI) regulates mutual funds, they are considered a safe investment option. One of the major advantages of investing in mutual funds is that at a relatively lower investment amount, investors can diversify their portfolios.
Everyone should consider mutual funds as an investment option because investing in them is one of the best ways to attain financial and personal goals. Since each fund has certain objectives to fulfil, it's advised that whenever one plans to invest in mutual funds, first ensure that their objectives are in line with that of the fund under consideration. When investing in funds via a SIP alleviated one is required to arrange a lump sum. Hence, a person can begin their investment journey with a small amount. Various mutual fund plans do allow an investor to invest a sum as low as Rs. 100 a month through SIP. Do note this option is not available with most of the other investment plans or schemes.
Do bear in mind that every investment option does possess a certain level of risk, and no investment is safe this also includes deposits. However, risk levels of mutual funds do vary across types because it directly depends on the underlying assets. Therefore, invest in a mutual fund scheme only when you are willing to assume the risk which comes along with it.
Why Invest in Mutual Funds?
Investing in mutual funds has various benefits- it has multiple advantages which enables investors to grow their money. By investing in mutual funds, one can fulfil its short, mid, and long term investment goals. Various fund options are available for one to pick from for investing- for example, there's low-risk to high-risk schemes such as debt and equity funds. One of the vital features which attract people's attention to invest in mutual funds is the minimum investment amount requirement. As an example, one may begin investing in a SIP at just Rs. 500.
The Advantages of Investing in Mutual Funds
Following are some of the advantages of investing in Mutual Funds:
1. Expert Money Management: Since there's a fund manager who manages mutual funds, the probabilities of making profits are higher. Every fund manager has a team of analysts and experts, and they do the researches and pick the best-performing instruments to include in the fund’s portfolio. Hence, it's alright if one doesn't possess much market knowledge.
2. Option to invest regularly in small amounts: One of the most vital advantages of investing in mutual funds is that one can stagger its investments over time by taking the SIP or systematic investment plan route. Through a SIP, on a regular basis, one can invest a fixed sum as low as Rs 100. This relieves the requirement of arranging a lump sum for beginning the investment journey.
3. Diversification: By investing in mutual funds, one's portfolio automatically gets diversified across several instruments. Since every mutual fund gets invested in various securities, investors gain the benefits of having more exposure to a diversified portfolio.
4. At any time one can redeem: Mutual fund schemes come as open-ended, hence, one can redeem its mutual fund units any time they desire. This ensures that at all times the investors are furnished with the benefits of liquidity and hassle-free withdrawals.
5. Well regulated: It's a fact that every mutual fund houses are under the purview of the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI). Apart from these, a self-regulatory formed by the fund houses known as the Association of Mutual Funds in India (AMFI) also tracks the fund plans. Therefore, for these reasons, it's believed that investing in mutual funds is safe.
6. Tax-efficient: If someone is seeking to save taxes under the provisions of Section 80C of the Income Tax Act, 1961, then investing in an equity-linked saving scheme (ELSS) or tax-saving mutual funds will be a wise step. Such mutual funds do provide tax deductions up to Rs. 1,50,000 a year, which enables one to save up to Rs. 46,800 a year in taxes.
The Risk Possessed by Mutual Funds
Before investing in mutual funds, do bear in mind that the risk levels of mutual funds vary across the types you're selecting to invest. As an example, equity funds bear the highest levels of risk because they invest mostly in the equity shares of companies across market capitalisations. Such funds are easily influenced by market movements.
Following are the various types of risks that come along with mutual funds:
1. Market Risk: Market risk refers to the risk which results in losses due to the underperformance of the market. Various factors affect the market movements, some examples are natural disasters, viral outbreaks, political unrest, and so on.
2. Concentration Risk: In general, the term concentration refers to the emphasis on one particular thing. Hence, it's never advisable to concentrate investments on a particular company. Although at times doing investments concentrated on one sector proves to be beneficial when that sector performs well, but when there's any adverse development, one's losses might get magnified.
3. Interest Rate Risk: Interest rates may fluctuate based on the credit availability with the lenders and the demand from borrowers and/or due to a variety of factors. Thus, a change in the rate of interest will have a direct impact on the returns that are offered by the underlying securities. For example, during the investment tenure, a rise in the interest rates can result in a drop in the price of securities.
4. Liquidity Risk: The liquidity risk term refers to the difficulty in exiting the holding of a security at a loss. Generally, this occurs when the fund manager fails to seek buyers.
5. Credit Risk: Credit risk refers to the likelihood of a scenario when the issuer of the security fails to pay the interest which was promised at the time of issuing the securities. One can estimate the credit risk by glancing at the credit ratings provided by various credit rating agencies.
The List of The Best Mutual Funds 2025
Mutual funds are largely categorised into equity funds, debt funds and hybrid/balanced funds based on their equity exposure. As an example, when a mutual fund’s equity exposure surpasses 65%, it is then classified under equity funds, and if not, then it goes under debt funds. Hybrid mutual funds get invested across equity and debt securities.
Below are the top-ranked funds from different categories of equity funds like large-, mid-, small-, multi-cap, ELSS, and sectoral funds:
Top 5 Large Cap Equity Funds
Canara Robeco Bluechip Equity Fund
IDBI India Top 100 Equity Fund
Axis Bluechip Fund
Kotak Bluechip Fund
BNP Paribas Large Cap Fund
Top 5 Mid Cap Equity Funds
Axis Mid Cap Fund
PGIM India Midcap Opportunities Fund
Edelweiss Mid Cap Fund
Invesco India Mid Cap Fund
Kotak Emerging Equity Scheme
Top 5 Small-Cap Equity Funds
SBI Small Cap Fund
Nippon India Small Cap Fund
Kotak Small Cap Fund
L&T Emerging Businesses Fund
HDFC Small Cap Fund
Top 5 Diversified/Multi-Cap Equity Funds
Parag Parikh Long Term Equity Fund
PGIM India Diversified Equity Fund
Mahindra Badhat Yojana
UTI Equity Fund
Baroda Pioneer Multi-Cap Fund
Top 5 (ELSS) Equity Linked Saving Schemes
BOI AXA Tax Advantage Fund
Canara Robeco Equity Tax Saver
Mirae Asset Tax Saver Fund
IDFC Tax Advantage (ELSS) Fund
DSP BlackRock Tax Saver Fund
Top 5 Sector Equity Funds
ICICI Prudential Technology Fund
Aditya Birla Sun Life Digital India Fund
TATA Digital India Fund
SBI Technology Opportunities Fund
Franklin India Technology Fund
Top 5 Value Equity Funds
IDFC Sterling Value Fund
JM Value Fund
Nippon India Value Fund
UTI Value Opportunities Fund
ICICI Prudential Value Discovery Fund
Top 5 Focused Equity Funds
IIFL Focused Equity Fund
SBI Focused Equity Fund
Principal Focused Multicap Fund
Axis Focused 25 Fund
Franklin India Focused Equity Fund
The Different Types of Mutual Funds to Invest
One must always invest in the type of fund which is in line with its financial goals. Following are some of the mutual funds you can think to invest in:
1. Top SIP Mutual Funds: Systematic investment plans (SIPs) permit investors to invest small amounts periodically. They have the liberty to select the frequency and quantum of the investment being made through SIP.
2. Top Equity Mutual Funds: Equity mutual funds are invested predominantly in equity instruments like stocks. They have the potential of delivering the highest returns among all mutual funds.
3. Top Small-Cap Mutual Funds: The equity funds that invest primarily in equity shares of companies that are classified under small market capitalisation are known as small-cap mutual funds.
4. Top Large-Cap Mutual Funds: Large-cap mutual funds are equity mutual funds that invest primarily in equity shares of large-cap companies. Such companies don't get affected much by market fluctuations.
5. Top Multi-Cap Mutual Funds: Mutual funds that are invested in equity shares of companies across all market capitalisations are known as multi-cap mutual funds. Investing in such funds is indeed one of the best ways to diversify an investor's portfolio.
6. Top Tax Saving Mutual Funds: Equity-linked savings schemes (ELSS) or tax-saving funds are equity-oriented funds. They are covered under Section 80C of the Income Tax Act, 1961. In fact, it's believed that investors may get tax deductions of up to Rs 1,50,000 a year by just investing in these funds.
7. Top Mid-Cap Mutual Funds: Equity funds that invest in equity shares of companies whose market capitalisation is between the range of Rs. 500 Crore to Rs. 10,000 Crore are known as mid-cap funds.
8. Top Liquid Funds: The class of debt funds that invest in high-rated debt instruments such as treasury bills are known as liquid funds. Such funds are thought to be a better option than regular savings bank accounts to park a person's idle money.
9. Top Debt Mutual Funds: Such types of mutual funds invest in instruments such as government bonds, corporate bonds, treasury bills, and so on, which provide regular dividend payouts.
10. Top Short-Term Mutual Funds: For risk-averse investors, short-term mutual funds are perceived to be an ideal option. The maturity period of these funds is between 15 days and 91 days.
11. Top Income Funds: Income funds are the type of funds that predominantly invest in securities that hold the capability of providing high dividends. These funds generally invest in debentures, bonds, and prefered shares.
12. Top Balanced Mutual funds: Hybrid pr balanced funds invest in both debt and equity instruments. It is also known that investing in such funds is one of the best ways to diversify an investor's portfolio.
How to Pick the Top Performing Mutual Funds?
You must be pondering how to pick the top-performing mutual funds? It's very simple if you keep in mind some of the vital parameters which should be considered while selecting them:
- Check the track record of the fund, especially check for the performance during the period when markets were down because the performance of a top-performing fund isn't much affected by the market movements. However, do note that past performances are not indicative of future returns.
- Check the financial ratios because before deciding if a fund is a top-performing one in its category, it is vital to assess the financial ratios such as alpha and beta. Since returns and risk always go hand in hand, investors must assess the risk-return potential, and this analysis is possible by financial ratios.
- The next step is to check the expense ratio as it's is a very crucial factor and it should be analysed while choosing a mutual fund plan. The expense ratio refers to the fee charged by the fund houses for managing one's investment. Do bear in mind that a higher expense ratio will reduce the returns of investors. Moreover, fund houses can't charge more than the limit which is set by the Securities and Exchange Board of India. Hence, before selecting a fund to invest in do check for the consistency in the expense ratio and make sure you are incurring appropriate charges as the expense ratio.
- Always bear in mind your investment objective because investments in any scheme must be done only after assessing your life goals. After an assessment of your needs is done, do map it with the objectives of a mutual fund scheme and determine if investing in it will yield the desired result.
- Base the mutual fund selection activity on its history. Mutual funds that have a more extended history are considered suitable, and a mutual fund is also judged on how well it has performed over a good range of timeframe, especially when the markets were going through a bad phase. Before making any investment-related decision, it's advised to consider at least five years of a fund’s history.
- Since fund managers handle the investors’ money, it is always a good idea to check their performance because they play a significant role in the success of a fund. It's the fund manager’s expertise that enables them to create profits. For example, only when the fund manager is able to identify the opportunities for making profitable investments, then the fund will have good returns.
Conclusion
As we have said earlier, mutual funds can be considered as a safe investment option in life because through it one can achieve their financial goals and needs. However, it's always advised to thoroughly analyze and assess every mutual fund's financial ratio before investing in any. Carefully analyze the Mutual Funds we have mentioned above and begin your investment journey! Do keep the vital parameters in mind while selecting the desired mutual funds you desire to invest in.
