Over 50% of Equity Mutual Funds Fail to Beat Benchmark Returns in 5 Years

Nearly 53% of actively managed equity mutual funds in India underperformed their respective benchmark indices over the last five years. According to Ace Mutual Funds data as of January 16, 2026, 53.33% of equity funds delivered lower returns than their benchmarks. The analysis covered 180 schemes across categories including large-cap, mid-cap, small-cap, flexi-cap, large & mid-cap, value, contra, dividend-yield, and focused funds.

Mid-Cap and Large & Mid-Cap Funds Hit Hardest

Underperformance was most pronounced in mid-cap funds, with 70.83% of 24 schemes lagging behind the Nifty Midcap 150 TRI benchmark. Examples include:

Similarly, large & mid-cap funds also struggled, with 69.23% of 26 schemes underperforming:

Flexi-Cap and Large-Cap Funds Also Lagged

Flexi-cap funds saw 58.33% underperformance. Axis Flexi Cap Fund returned 14.27%, well below its benchmark of 21.41%, while Aditya Birla SL Flexi Cap Fund missed its benchmark by nearly 3 percentage points.

Large-cap funds were not immune, with 55.56% underperforming:

Exception Funds Outperforming Benchmarks

Despite broad underperformance, some funds stood out:

• Parag Parikh Flexi Cap Fund: 27.91% vs benchmark 21.41% (+6.49%)
• Bandhan Small Cap Fund: 39.41% vs benchmark 23.07% (+16.34%)
• HDFC Focused Fund: 36.25% vs benchmark 21.41% (+14.84%)

These funds delivered strong returns despite category-wide stress, proving that careful selection can reward investors.

Read more: 3 Large-Cap Stocks Which Were Added by Mutual Funds in December 2025.

Conclusion

While 53% of equity mutual funds underperformed over five years, notable exceptions demonstrate that active management can still add value. Investors should focus on fund quality, strategy consistency, and benchmark alignment rather than relying solely on past returns when selecting schemes.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Mutual fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.