Equity Mutual Funds
Equity mutual funds offer investors a potentially higher-risk, higher-reward investment option by investing in a diversified portfolio of stocks, potentially providing long-term growth opportunities and the potential for capital appreciation over time.
Know more about Equity Mutual Funds
Large Cap
26% - 28%
Flexi Cap
29% - 31%
Mid Cap
36% - 38%
Large & Mid Cap
30% - 32%
Small Cap
47% - 49%
Multi-Cap
33% - 35%
Focused Funds
27% - 29%
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Name
AUM
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1Y return
Exp. Ratio
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1Y return
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Mirae Asset NYSE FANG+ ETF Fund of Fund Direct Growth▲ 50.34%AUM ₹834 Cr •
Expense 0.87%
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HDFC Small Cap Fund-Direct Growth Option▲ 32.51%AUM ₹15857 Cr •
Expense 0.79%
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Nippon India Power & Infra Fund - Direct Plan - Growth▲ 31.41%AUM ₹2011 Cr •
Expense 1.54%
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ICICI Prudential Infrastructure Fund Direct Plan Growth▲ 31.17%AUM ₹2373 Cr •
Expense 1.63%
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Kotak Infrastructure & Economic Reform Fund- Direct Plan- Growth Option▲ 30.49%AUM ₹802 Cr •
Expense 0.96%
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Aditya Birla Sun Life Infrastructure Fund Direct Plan Growth▲ 29.8%AUM ₹607 Cr •
Expense 1.68%
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Franklin India Smaller Companies Fund Direct Growth▲ 29.36%AUM ₹7593 Cr •
Expense 0.84%
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Invesco India PSU Equity Fund Direct Plan Growth▲ 29.11%AUM ₹432 Cr •
Expense 0.96%
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Tata Small Cap Fund Direct Growth▲ 28.77%AUM ₹3841 Cr •
Expense 0.25%
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Quant Quantamental Fund Direct Growth▲ 28.66%AUM ₹580 Cr •
Expense 0.56%
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Motilal Oswal Midcap 30 Direct Growth▲ 28.61%AUM ₹4033 Cr •
Expense 0.76%
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LIC MF Banking & Financial Services Fund Direct Growth▲ 28.33%AUM ₹141 Cr •
Expense 1.54%
- Nippon India Small Cap Fund - Direct Plan - Growth Plan▲ 28.27%
AUM ₹26294 Cr •
Expense 0.82%
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HSBC Infrastructure Fund Direct Plan Growth Option▲ 27.91%AUM ₹1476 Cr •
Expense 1.11%
- Tata Banking & Financial Services Fund Direct Growth▲ 27.72%
AUM ₹1363 Cr •
Expense 0.57%
- HDFC Infrastructure Fund -Direct Plan - Growth Option▲ 27.54%
AUM ₹631 Cr •
Expense 1.74%
- Quant Small Cap Fund Growth Option Direct Plan▲ 27.33%
AUM ₹4092 Cr •
Expense 0.62%
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Sundaram Financial Services Opportunities Fund Direct Plan Growth Option▲ 27.25%AUM ₹659 Cr •
Expense 0.97%
- Aditya Birla Sun Life PSU Equity Fund Direct Growth▲ 26.61%
AUM ₹1083 Cr •
Expense 0.8%
- HDFC Multi Cap Fund Direct Growth▲ 26.54%
AUM ₹6232 Cr •
Expense 0.63%
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Insights on Equity Funds
Performance vs. Mid Cap and Small Cap Funds
- In the last 1 year, large cap funds have underperformed both mid cap funds and small cap funds
- In the last 3 years, large cap funds have underperformed both mid cap funds and small cap funds
- In the last 5 years, large cap funds have underperformed both mid cap funds and small cap funds
Top Equity Funds by Net Inflow
- Parag Parikh Flexi Cap Direct Growth has seen net inflow of ₹5903.9 Cr in the last 6 months in the equity s funds category
- Nippon India Small Cap Fund - Direct Plan - Growth Plan has seen net inflow of ₹3449.1 Cr in the last 6 months in the equity s funds category
- Kotak Emerging Equity Scheme Direct Growth has seen net inflow of ₹3431.7 Cr in the last 6 months in the equity s funds category
Bottom Equity Funds by Net Outflow
- Axis Bluechip Fund Direct Plan Growth has seen net outflow of ₹3397.2 Cr in the last 6 months in the equity s funds category
- Axis Focused 25 Fund Direct Plan Growth Option has seen net outflow of ₹2896.5 Cr in the last 6 months in the equity s funds category
- PGIM India Flexi Cap Fund Direct Growth has seen net outflow of ₹2573.6 Cr in the last 6 months in the equity s funds category
Top Holdings of Equity Funds
- ICICI Bank Ltd is held by 317 out of 555 mutual funds in the equity s funds category, with a total investment value of ₹89665.87Cr
- HDFC Bank Ltd is held by 300 out of 555 mutual funds in the equity s funds category, with a total investment value of ₹76837.69Cr
- State Bank of India is held by 287 out of 555 mutual funds in the equity s funds category, with a total investment value of ₹38304.98Cr
What are Equity Funds?
Equity funds are mutual funds that invest in stocks to generate potentially higher returns. As the riskiest type of mutual fund, they offer the potential for greater returns than Debt Funds and Hybrid Funds . However, the performance of the market and the selected companies significantly impacts investors' returns. If you're comfortable with risk and seek the potential for higher returns, equity funds may be a suitable investment option.
Features of Equity Funds
Unlike other mutual funds, equity funds are considered one of the best ways to grow your wealth and create an enjoyable investing habit. There are many advantages to investing in best equity funds as follows:
• Professional fund management
By investing in Equity Mutual Funds, you transfer the responsibility of stock selection, rebalancing and research to the fund manager. You can access the expertise of knowledgeable fund managers at a very low cost.
• Diversification of investments:
Equity funds provide diversification benefits at a very low cost, as compared to direct investing in stocks. For example, for as low as Rs 500, you can take exposure to 20-30 companies. This would be nearly impossible to achieve through direct investing.
• The ticket size of investments
You can start with as low as INR 500 per month as SIP, or you can have a lump sum commitment according to your nature of investing and risk appetite. This freedom makes best equity mutual funds a lucrative investment instrument.
• All the funds are well-regulated
The equity funds are regulated by SEBI, which means they have a lot of transparency and sufficient disclosure. This helps investors to make informed decisions about their investments.
Types of Equity Funds
Equity funds can be: Active or passive. In an Active Fund, a fund manager does market research, examines the performance of companies, and looks for the best stocks to invest in. In a Passive Fund, the fund manager simply builds a portfolio that mirrors a popular market index, like Sensex or Nifty.
There are different types of direct equity funds, and all of them have notable characteristics. Based on those characteristics, here are some of the types of direct equity mutual funds:
Large and Mid Cap
These equity funds have their investments tied up in large-cap stocks and mid-cap stocks, too. According to the SEBI guidelines, the minimum threshold of investment for both of these stocks is 35%. The remainder of the investment can be made in any kind of stock.
Depending on the investing style, there are other types of equity mutual funds, like dividend yield funds, value funds, focused funds, and sectoral or thematic funds. All these funds are unique and different from each other in terms of the investment involved.
Dividend Yield Funds
As per SEBI, these funds must invest majorly in dividend yielding stocks and have at least 65% of total assets in equity related instruments.
Value Fund
This fund follows a value investment strategy. These funds should invest 65% of total assets in equity and its related securities.
Contra Fund
This fund follows contrarian investment strategy and has to invest 65% of total assets in equity and its related securities.
Sectoral/Thematic Fund
As per SEBI, this fund has to invest 80% of total assets in equity and related instruments of a particular theme or sector.
Focused Funds
As per SEBI, this fund can invest in a maximum of 30 stocks from either small, mid or large cap stocks and should have 65% of total assets in equity and related instruments.
Who Should Invest in Equity Funds?
• Ideal for investors seeking high returns over a long-term horizon.
• Requires a high risk tolerance as equity fund returns can be volatile.
• Staying invested for 5-7 years increases the chances of generating healthy average returns.
• Option to invest for as low as Rs 500 offers diversification and access to professional expertise.
• Provides tax benefits compared to debt funds, useful for long-term planning and retirement savings.
• Equity-linked savings schemes (ELSS) can be beneficial for saving taxes and growing wealth quickly.
• Active monitoring is essential for equity fund investors to make informed decisions based on market trends and economic indicators.
• Equity funds can help beat inflation and preserve the purchasing power of savings over the long-term.
What should You consider while investing in an Equity Fund?
Since equity funds are entirely different from most other types of funds, there are some important things you need to consider before investing. They are as follows:
Objectives of the fund
Best equity mutual funds are those which invest as per the stated investment objective of the fund. An investment objective can be to achieve long term capital appreciation by investing in a diversified portfolio predominantly consisting of equity securities of Large Cap companies including derivatives. Another fund may have an objective to follow a factor-based strategy (such as value, growth, momentum etc) to outperform an underlying benchmark. Some funds may just want to replicate the performance of a benchmark with the least possible tracking error.
The risk involved in the fund
The performance of equity mutual funds can vary due to various factors. While they are sufficiently diversified (and hence not exposed to much of firm-specific risk), the systematic risk is still there. Hence, they are subject to market risk.
Cost of the fund
This includes expense ratio and exit load. Investment companies charge a fee called expense ratio which includes management fees (fees of fund manager) and operational costs. Regular funds will always have higher expenses (as indicated by their expense ratio) due to added commission costs as compared to their direct counterparts. Hence, a direct plan will always generate higher return when compared with the same fund’s regular plan.
The spectrum of investment
Equity funds are for investors who are willing to stay invested for the long-term. Due to high volatility, you can only expect returns in the range of 10-12% in a time frame of 5 years or more.
Your financial goals
Only invest in equity mutual funds if you are into calculated risks, ready for long-term returns, and have a plan for your retirement. Otherwise, this is not meant for short-term rewards and gains.
How to Invest in Equity Funds Online?
STEP 2
Create your profile
STEP 3
Select any best equity fund from our catalogue
STEP 4
Choose between Starting a SIP or One time lumpsum
STEP 5
Complete the payment process
Taxability of Equity Funds
Dividends and Capital Gains procured from equity funds are taxable in India, and it is essential to understand the taxation of equity funds. Without this knowledge, planning taxes for your financial planning is not effective.
Capital Gains are defined as the difference in the cost and selling price of the equity mutual funds. The taxation on Equity Mutual Funds is similar to how Equities are taxed.
Holding period upto 12 months is considered short-term, while holding the fund for more than 1 year would be long-term.
• The short-term capital gains rate is 15% plus cess.
• In case of long-term gains upto Rs 1 lakh are exempt from tax. Gains above Rs 1 lakh are taxed at a rate of 10% ( plus cess)
• Any dividend from mutual funds will be taxable at the hands of the investor at the income tax slab rate.
How to Evaluate Equity Funds?
The difference between seasoned investors and beginners is their ability to understand equity funds and invest in the right one not to lose money.
• Track record
If the fund has consistently outperformed its peers and the benchmark over a 3 year and 5-year horizon, it is an indication that the fund is well-managed. While past performance is no guarantee of the future returns, it is an important indicator about the track record of the fund, and helps in evaluation with respect to its peers.
• Management
Management of the equity funds plays an important role in its performance. Hence, if you have confidence in the asset management company and they are doing an ideal job in necessitating growth, you can bank on this fund. Also, the reputation of the fund manager is an important factor to check.
• Expense ratio attached to the funds
This is usually seen as a parameter against all kinds of funds. It is defined as the money undertaken by fund managers for maintenance, marketing, distribution and selling expenses, etc. The right fund will have a desirable expense ratio within the range of 0.5 to 2.5%, which is an ideal industry benchmark.
• Asset allocation
One of the key things to look at is how diversified is your fund’s portfolio and where have they majorly invested in. Some funds focus on more large and mid caps while some focus on a particular sector like banking or infra. Your risk and returns potential depends on the type of asset allocation you prefer.
Outlook
To conclude, Equity mutual funds are high risk - high return instruments. Among all categories of mutual funds, equity funds generally deliver the highest returns. On average, equity funds have generated returns in the range of 10% to 12%. However, the returns fluctuate depending on the market movement and overall economic conditions. One must do his due diligence before investing in these mutual funds.
Taxability of Equity Mutual Funds
- Short Term Capital Gains: If the units of mutual funds are sold in less than one year, then the gains are taxed at the rate of 15% (plus 4% cess).
- Long Term Capital Gains: If the units of mutual funds are sold in more than one, then gains up to 1 lakh is tax free while gains over 1 lakh is taxed at 15% (plus 4% cess).
Limitations of Equity Mutual Funds
- Market volatility: Returns are a function of the stock market movements. Higher market volatility can lead to fluctuations in returns.
- Fund manager performance: The performance of the fund is dependent on the fund manager's skill in selecting and managing stocks.
- Fees and expenses: High fees can erode returns, reducing the overall value of the investment.
- Diversification limitations: Some equity mutual funds may have limited diversification, increasing risk exposure.
Frequently Asked Questions
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Do equity funds pay dividends?
How to choose the best equity funds to invest?
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