Top Performing Equity Funds in India 2022

Making your investment in the right place at the right time can bring you optimum returns and benefits. If you are an investor who has a high-risk tolerance and wishes to invest in the best companies of the country, equity mutual funds might be the one for you. Although such funds tend to be risky, they also have a high potential to generate substantial returns. 

List of Top Performing Equity Mutual Funds 

Here is a list of the top 10 equity mutual funds for your reference. The following table is in descending order as per their 5-year CAGR or annualised return. 

Fund Name Fund Type 3-Year CAGR*5-Year CAGR*
Canara Robeco Small Cap Fund – Direct Plan – GrowthSmall Cap Fund44.82%NA
PGIM India Mid Cap Opportunities Fund – Direct Plan – GrowthMid Cap Fund44.37%21.40%
Quant Tax Plan – Direct Plan – GrowthELSS44.36%23.68%
Quant Mid Cap Fund – Direct Plan – GrowthMid Cap Fund40.78%21.98%
Quant Active Fund – Direct Plan – GrowthMulti Cap Fund39.71%23.32%
SBI Contra Fund – Direct Plan – GrowthContra Fund32.81%15.78%
Bank of India Manufacturing & Infrastructure Fund – Direct Plan – GrowthSectoral/Thematic31.17%15.89%
PGIM India Flexi Cap Fund – Direct Plan – GrowthFlexi Cap Fund29.71%16.86%
Invesco India Infrastructure Fund – Direct Plan – GrowthSectoral/Thematic29.29%16.15%
IDFC Sterling Value Fund – Direct Plan – GrowthValue Fund29.02%12.78%

The funds in this table have been listed as per their 3-year annualised returns in descending order. 

*Note: Returns data valid as of September 06, 2022. 

What Are Equity Mutual Funds? 

Equity mutual funds are mutual fund schemes which primarily invest in shares of companies listed on the stock market. The stocks are selected by expert fund managers who maintain and balance the portfolio to minimise risk and maximise returns. 

Equity-oriented funds are further classified into different sub-categories based on various parameters. 

What Are the Types of Equity Mutual Funds? 

Here are the types of equity mutual funds depending upon the style of investment:

Categorisation based on market capitalisation: 

  • Large cap: As per SEBI guidelines, these funds must invest 80% of their assets in equity stocks of the top 100 companies with respect to market capitalization.
  • Mid-cap: These funds must invest a minimum of 65% of their assets in equities of mid-cap companies. Mid cap companies are companies ranked from 101 to 250 in terms of market capitalization.
  • Small cap: According to SEBI mandate, these funds have to invest a minimum of 65% of their assets in equities of companies that are ranked 251 onwards in terms of market capitalization.
  • Multi cap: Also known as Diversified Equity Funds, these funds invest across all market cap segments, and there is no limit on the percentage of assets invested. 
  • Large & mid-cap: As the name suggests, these funds invest across companies from large and mid-cap segments. They must invest a minimum of 35% of their assets in large and mid-cap stocks each, as per SEBI mandate. 

Categorisation based on investment style: 

  • Dividend Yield fund: These funds invest a minimum of 65% of their assets in dividend-yielding stocks. Dividend yield of a stock is the ratio between the dividend paid by the stock and its current market price. 
  • Value fund: Value funds follow the value investment strategy to choose stocks. Fund managers find out the intrinsic value of a stock and then choose the one which is trading at a discounted price to its intrinsic value. Such funds must invest at least 65% of their assets in such stocks. 
  • Focused fund: As per SEBI regulations, these funds can invest in a maximum of 30 stocks. Since the number of stocks is limited, the concentration is high in these funds, making them high-risk for investment. These must invest at least 65% of their assets in equity and equity-related instruments. 
  • Sectoral/Thematic fund: As per SEBI mandate, these funds must invest a minimum of 80% of their assets in equities of companies belonging to a particular sector or theme. 
  • ELSS: ELSS or Equity-Linked Savings Scheme is a tax-saving mutual fund option. It comes with a lock-in period of 3 years which decreases the liquidity associated with the fund. But upon maturity, investors can avail tax deduction of up to Rs. 1.5 lakh on their investment u/s 80C of the Income Tax Act.  

How Do Equity Mutual Funds Work? 

Fund houses pool money from multiple investors and invest that in stocks of different companies. Equity funds can be managed actively or passively. For actively managed funds, the fund managers conduct continuous research to pick the best-suited stocks for the portfolio. 

A passively managed fund does not involve frequent changes from the fund manager. Instead, they try to replicate the returns of a benchmark index.

Asset Management companies levy a charge on the investors for the management of a mutual fund scheme. This is known as the Expense Ratio. This includes brokerage, operational and management costs, and marketing and distribution charges. 

Who Should Invest in Equity Mutual Funds?

Investing in equity funds requires time and patience. Hence, investors fulfilling the following criteria may consider investing in equity mutual funds: 

  • Investors with a long-term objective: Investing in equities can prove to be fruitful if you take the benefits of compounding into account. For this to occur, one needs to stay invested for quite a long haul. Also, investing for a long time can provide you with a shield against inflation. 
  • Investors looking for tax-saving investment options: Some equity mutual funds offer tax-saving opportunities. For example, if you invest in ELSS, you can get a maximum tax deduction of Rs. 1.5 lakh under Section 80C of the Income Tax Act. However, ELSS comes with a lock-in period of 3 years. 
  • Investors with high-risk tolerance: Equity funds are considered to be quite risky when compared to the other types of mutual funds, such as debt and hybrid. That’s why it requires the constant involvement of the fund managers. Balancing the risk and the return involves a lot of research and strategy from the fund manager. Hence, investors can expect a lot of ups and downs in the investment value during their investment tenure. 
  • Novice investors: Investors, who are new to the stock market, need to do intensive market analysis before investing in stocks. However, equity funds are a good option to start your investments in equity as you get the benefit of experience and expertise of fund managers as well as diversification across stocks. 

Benefits of Investing in Equity Mutual Funds 

Here are some benefits of investing in equity funds which potential investors should know about:

  • Most of the equity funds are actively managed by the fund managers. These managers have years of expertise and skills to diversify and balance your portfolio to maximise the return. Hence, investing in Equity Funds will earn you the assurance of professional fund management. 
  • You can have a wide and diverse portfolio by investing in an equity fund. You get to invest in top stocks listed in the share market of companies from different market segments. This ensures that none of your investment is concentrated in a few stocks, which is riskier. 
  • Risk mitigation in a mutual fund is not something one can learn in one day. Fund managers have the expertise and also follow a particular investment style to choose between stocks and minimise the risk as well. Hence, diversification leads to the mitigation of risk associated with equity funds.  
  • The diversification that equity funds bring to the table can get pretty expensive if you choose some other similar investment option. But with equity mutual funds, one can start investing with an amount as small as Rs.500 through SIP. Also, you will not necessarily need a Demat account to invest in Equity Funds. Only KYC verification is sufficient. 
  • ELSS is the tax-saving investment option under Equity. The type of gain, whether short-term or long-term, is decided upon their holding period. Therefore, these also experience some tax benefits as per capital gain taxation rules. 

Things to Consider Before Investing in Equity Mutual Funds

As a potential investor, you may consider the following factors before investing in equity mutual funds: 

  • Investment objective: Investors with long-term investment goals can consider investing in equity mutual funds. Equity funds might be ideal for investors who have long-term investment objectives such as retirement plans, children’s education or purchasing a property. Investing for an extended period in equity funds brings you the benefit of compounding. There’s a high possibility of generating losses for mid or short-term investments. 
  • Past performance of the fund: No past record can guarantee a mutual fund’s future returns. But analysing the fund’s performance against its benchmark and peers can give you an idea of what you are going to get from your investments. For example, if the fund has outperformed its benchmark indexes and peers consistently, you can be hopeful about your investments. 
  • Risk: When you are making an investment in any type of mutual fund, you are signing up for the risk. The risk level might vary, but it’s inevitable. Hence, no return can be guaranteed on investments. Equity funds hold the potential to grow, but due to one reason or another, their growth can face obstacles. This, in turn, might affect your returns on investment. That’s why equity funds mostly suit investors with high-risk tolerance. 
  • Expense ratio: The fund houses or AMCs charge a fee for their service. This fee, known as the expense ratio, is the operational and management cost of the mutual fund. Funds with a higher expense ratio might affect the profitability of your returns. Investing in a fund with a lower expense ratio but a good track record is considered ideal. 

Taxation of Equity Mutual Funds

Equity funds are taxed based on the holding period of the mutual fund units. Here are the tax regulations on returns generated from an equity mutual fund: 

Short-term capital gainFund units held for less than 12 months since purchase Taxed at 15% 

Long-term capital gain 
Fund units held for 12 months or more since investment and returns are less than Rs. 1 lakh Tax-exempt 
Fund units held for 12 months or more and returns exceed Rs. 1 lakh Taxed at 10% 

Final Word 

Although equity mutual funds tend to be risky investment options, they have high return potential. The returns are entirely based on the market conditions; however, the fund managers try to optimise the returns and mitigate the risk by using their investment strategies effectively. If you wish to invest in stocks of the leading companies in our country, you can consider investing in top equity mutual funds in India.

Frequently Asked Questions

How long should I stay invested in an equity mutual fund?

There is no hard and fast rule for this. But staying invested in an equity fund for a minimum of 5 to 7 years can earn you optimal returns due to the benefit of compounding. Hence, it is often considered ideal for investors who have long-term investment objectives.

Are equity funds risky?

Equity funds invest in stocks, and stock markets are heavily dependent on market fluctuations and external influences. Hence, investing in equity funds is considered risky. However, investing in equity funds for the long term may help to mitigate the associated risks.

What is CAGR?

Compound Annual Growth Rate or CAGR depicts the annualised average rate of return of a mutual fund scheme over a specific time period. It is used to measure the annual growth of an investment over a specific time period.

Credit Principal at Wint Wealth
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The article may also contain information which are the personal views/opinions of the authors. The information contained in this article is for general, educational and awareness purposes only and is not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision, whether related to investment or otherwise, taken on the basis of this article.

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