“Flexibility of mind is an essential asset in the stock market. Markets change, and if you can’t change with them, you’re going to get hurt.” — Walter Schloss.
This investment philosophy by a legendary value investor and contemporary of Warren Buffett highlights that versatility is at the heart of investing.
It isn’t just about optimal diversification but maintaining the mental adaptability and agility to change your mind when the market environment shifts.
This is exactly how flexi-cap mutual funds function. They invest dynamically — without any upper or lower limit — across large-caps, mid-caps, and small-caps, depending on their outlook.
Currently, Value Research data shows that although flexi-cap funds are maintaining a large-cap bias, quite a few from this category are gradually increasing their exposure to small caps, perceiving valuations as attractive (particularly on PB at 3.6, which is at the 5-year median, as of 12 June 2026).
But then, there are funds such as HDFC Flexi Cap Fund and Parag Parikh Flexi Cap, which have consistently maintained a large-cap bias over the last three years, perceiving a greater margin of safety in well-established companies during times of uncertainty.
The price-to-equity (PE) and price-to-book (PB) ratios of the Nifty 100 Index, which represents large-caps, are currently at 20.1 and 3.2, respectively. This is well below the 5-year medians of 22.4 and 4.1 of the Nifty Smallcap 250 Index (as of 12 June 2026).
Has this approach helped? Well, we will come to that a bit later. First, let’s understand the portfolio characteristics of these funds in detail, which will help recognise what has driven the performance.
Portfolio Attributes
While both HDFC Flexi Cap Fund and Parag Parikh Flexi Cap maintain a large-cap bias, they hold versatile, unique portfolios.
| No. of Stocks | Top 10 Stock (%) | Top 3 Sectors (%) | PB Ratio | PE Ratio | |
| HDFC Flexi Cap Fund | 67 | 45.9 | 62.2 | 3.2 | 21.9 |
| Parag Parikh Flexi Cap Fund | 53* | 49.6 | 56.0 | 3.0 | 17.0 |
| *Including arbitrage positions |
HDFC Flexi Cap Fund was launched in January 1995 as HDFC Equity Fund and is among the oldest schemes in the Indian mutual fund industry.
Earlier, it followed a multi-cap approach, but after the mutual fund categorisation and rationalisation norms kicked in, the fund house changed the fundamental attributes, making the fund flexi-cap and rechristening it as HDFC Flexi Cap Fund with effect from January 29, 2021.
Today, it is the second-largest flexi-cap fund in India, managing assets over Rs 1.01 lakh crore (as per the May 2026 portfolio).
93% of the fund’s assets are currently in equities, around 2% in REITs, about 0.5% in debt, and 4% in cash & cash equivalents. In equities, the fund currently holds 67 stocks, of which 82% are large caps, 10% are mid caps, and 8% are small caps.
The top 10 stocks comprise 45.9% of the equity portfolio, making the fund fairly diversified. Heavyweight large-caps, such as ICICI Bank, Axis Bank, HDFC Bank, SBI, and SBI Life Insurance, are among the top holdings.
Top Holdings of HDFC Flexi Cap Fund
Data as per the May 2026 portfolio
Stocks such as Bharti Airtel, SBI, Power Grid, and L&T have compounded wealth well over the longer periods, while those such as HDFC Bank, Kotak Mahindra Bank, and Axis Bank have significantly underperformed.
Financial services, consumer discretionary, and technology are the top 3 sectors of HDFC Flexi Cap Fund, comprising 62.2% of the portfolio. The fund is overweight in these sectors compared to the category.
The valuation ratios – PB (3.2) and PE (21.9) – reveal that the fund is value-conscious, yet aggressive at times when seeking growth at a reasonable price.
Also, to realise the portfolio’s full growth potential of stocks, the fund follows a strict buy-and-hold strategy. The low equity portfolio turnover of 9.1% underscores this; it is exceptionally low compared with some peers in the category.
As regards the Parag Parikh Flexi Cap Fund, it was launched in May 2013 as a multi-cap fund following a value style and was hence called the Parag Parikh Long Term Value Fund. After SEBI allowed the flexi-cap fund category in November 2020, the fund was rechristened the following month.
Today, it is the largest fund in the flexi-cap category with an AUM of over Rs 1.41 lakh crore.
It holds nearly 82% of its assets in equities (including arbitrage positions of around 0.7% and foreign securities of 12.1%), about 14% in debt & money market instruments (including certificate of deposits, commercial papers, treasury bills, and holdings in Parag Parikh Liquid Fund), and 4% in REITs & InvITs.
Parag Parikh Flexi Cap Fund currently has 37 stocks in its portfolio, including the arbitrage positions and foreign equities. It is one of the very few funds in the category to have meaningful exposure to foreign equities.
The fund has nearly 93% exposure to large-caps, around 2% to mid-caps, and 5% to small-caps.
The top 10 stocks comprise 49.6% the equity portfolio, i.e., nearly half of the total, indicating the fund follows a conviction-driven, focused approach.
Some of the top names include HDFC Bank, Power Grid, Coal India, ITC, and ICICI Bank.
Top Holdings of Parag Parikh Flexi Cap Fund
Data as per the May 2026 portfolio
PSUs like Power Grid and Coal India, alongside core manufacturing/auto components like Mahindra & Mahindra, have compounded wealth impressively over the longer periods. While certain banks, such as Kotak Mahindra Bank and HDFC Bank, have proved to be laggards over long periods.
Banking & financial services, technology and consumer discretionary are the top 3 sectors currently comprising 55.97% of the equity portfolio. That said, the fund is underweight on banking & financials and consumer discretionary compared to other funds in the category.
Parag Parikh Flexi Cap Fund’s portfolio has a slightly lower PE (17.0) than the HDFC Flexi Cap Fund, although their PB ratios are sort of similar.
The fund holds its portfolio with a long-term view and refrains from excessive churning. As per the May 2026 portfolio, the turnover ratio was nearly 17.2% (excluding arbitrage positions), reflecting a buy-and-hold, conviction-driven approach.
What Is the Investment Philosophy and Strategy Behind the Portfolio?
Both these funds, HDFC Flexi Cap Fund and Parag Parikh Flexi Cap, are actively managed and quite conscious of quality.
As regards HDFC Flexi Cap Fund, it considers companies that are likely to achieve above-average growth, enjoying distinct competitive advantages, and having superior financial strength.
The portfolio construction is guided by three core principles: Valuation discipline, commitment to quality, and diversification.
Source: HDFC Mutual Fund Presentation
For valuations, the fund looks for growth at a reasonable price (GARP) or at an attractive price (GAAP), turnaround and other growth categories to identify compelling risk-reward opportunities.
For sector allocation, the fund is selectively overweight on sectors. For instance, currently it is overweight on financial services, consumer discretionary, technology and healthcare, where it is seeing value and growth opportunities (risk-reward dynamics).
Overall, a bottom-up approach is followed rather than benchmark weights.
Speaking of the Parag Parikh Flexi Cap Fund, it is highly value-conscious. It looks for business prospects and intrinsic value, management quality, reasonable price approach (rather than cigar butt kind of value), decent return on capital, and predictable cash flow, among a host of other aspects.
Its overall approach is to maintain a margin of safety to prevent large drawdowns and the permanent loss of capital.
The fund keeps the environment in context. The investment portfolio is regularly monitored to understand the impact of changes in business and economic trends, nevertheless, by following a bottom-up approach.
Now, let’s come to the question: Has this approach rewarded investors?
Performance
Well, both HDFC Flexi Cap Fund and Parag Parikh Flexi Cap are among the top performers in the flexi-cap funds category over long periods – 3 years, 5 years, and 10 years.
On 3-year and 5-year periods, HDFC Flexi Cap has outperformed Parag Parikh Flexi Cap Fund, the category median, and the BSE 500 – TRI, clocking compounded average growth rates (CAGRs) of 17.8% and 17.6%, respectively.
This is mainly due to aggressive portfolio positioning based on GARP. Moreover, overweight positions in financial services, consumer discretionary, and healthcare have boosted the fund’s performance.
Returns and Risk Ratios: HDFC Flexi Cap Fund vs. Parag Parikh Flexi Cap Fund
| Absolute | CAGR | Risk Ratios | ||||||
| 1 Yr (%) | 3 Yr (%) | 5 Yr (%) | 10 Yr (%) | SI (%) | Std Dev (%) | Sharpe Ratio | Sortino Ratio | |
| HDFC Flexi Cap Fund | 0.9 | 17.8 | 17.6 | 16.6 | 15.9 | 13.1 | 0.9 | 1.1 |
| Parag Parikh Flexi Cap Fund | -1.9 | 15.5 | 15.0 | 17.6 | 18.3 | 9.9 | 0.9 | 1.3 |
| Category Median | -0.5 | 14.2 | 12.1 | 14.5 | – | 15.4 | 0.6 | 0.8 |
| BSE 500 TRI | -4.6 | 12.3 | 11.2 | 13.7 | – | 15.4 | 0.5 | 0.7 |
On 10-year returns and since-inception returns, HDFC Flexi Cap Fund has lagged. In comparison, Parag Parikh Flexi Cap Fund is a clear winner, with CAGRs of 17.6% and 18.3%, respectively. Foreign equities, particularly U.S. tech stocks that have witnessed a solid bull run over the last decade, have driven the outperformance of the Parag Parikh Flexi Cap Fund.
Risk and Risk-adjusted Returns
The risk ratios indicate that HDFC Flexi Cap Fund (due to its slightly more aggressive portfolio positioning) has exposed its investors to a slightly higher risk (standard deviation of 13.1%) compared to Parag Parikh Flexi Cap Fund (standard deviation of 9.9%).
In other words, the high returns over 3 years and 5 years have come at a higher risk. Yet this risk is still lower than the category median and the BSE 500 -TRI.
The Sharpe ratio (which measures excess returns per unit of total risk) of HDFC Flexi Cap Fund is on par with that of the Parag Parikh Flexi Cap Fund.
However, the Sortino ratio (which measures excess returns generated per unit of downside risk), HDFC Flexi Cap Fund is placed slightly lower (1.1), revealing that the downside risk is better managed by Parag Parikh Flexi Cap Fund (Sortino ratio of 1.3), which at times takes cash calls by deploying into money market instruments and other liquid instruments, particularly when the equity market valuations look expensive.
Fund Managers: Have They Influenced Performance?
While HDFC Flexi Cap Fund and Parag Parikh Flexi Cap Fund come from established mutual fund houses that follow robust investment processes & systems, fund managers have played a pivotal role in driving their performance.
For over two decades, HDFC Flexi Cap Fund was managed by veteran fund manager Prashant Jain until July 2022. Under his watch, the fund clocked an impeccable 20.9% CAGR, generating alpha over the long term.
Following Prashant Jain’s exit from HDFC Mutual Fund, Roshi Jain took over and managed the fund until December 2025. Under her watch, too, the fund successfully outperformed the category average and the benchmark, clocking about 23.6% CAGR.
After her exit from HDFC Mutual Fund, Chirag Setalvad, a senior fund manager at HDFC Mutual Fund, managed HDFC Flexi Cap Fund for a brief time before Amit Ganatra took charge on 1 February 2026. He is also a senior fund manager with over 22 years of experience in fund management and equity research, and before joining HDFC Mutual Fund on 28 January 2026, was Director & Head of Equities with Invesco India Asset Management.
As far as Parag Parikh Flexi Cap Fund is concerned, it has been continuously managed since its inception under the leadership of Rajeev Thakkar, Chief Investment Officer – Equity and Director.
The overseas securities portfolio has been managed by Raunak Onkar since its inception.
The fund is also co-managed by other fund managers, including Raj Mehta, Rukun Tarachandani, and a few others.
The multi-manager approach has helped the fund to be among the top-performing flexi-cap funds.
Which Flexi Cap Fund Should You Add to Your Portfolio?
HDFC Flexi Cap Fund and Parag Flexi Cap Fund are unique in their own way.
In the case of HDFC Flexi Cap Fund, the scheme information document permits exposure to overseas equities; historically, it has maintained a zero allocation to foreign stocks.
In contrast, Parag Flexi Cap Fund has held overseas securities in the portfolio. At one time, in 2020-2021, the fund’s weight in foreign securities was 28-30%, which is currently around 12%.
Summary: HDFC Flexi Cap Fund vs. Parag Parikh Flexi Cap Fund
| HDFC Flexi Cap Fund | Parag Parikh Cap Fund | |
| Portfolio Positioning | Bit Aggressive | Value Conscious |
| Foreign Securities exposure | Nil | Yes |
| Risk | High-to-Very High | Medium-to-High |
| Returns | High | Above average |
If you wish to have tactical exposure to foreign securities, are value-conscious, and do not want an aggressive portfolio, and want to protect downside risk, Parag Parikh Flexi Cap Fund may be a better fit for your portfolio.
But if you’re looking for exposure across the market capitalisation segment, largely in domestic equities, with aggressive portfolio positioning and are willing to take slightly more risk, the HDFC Flexi Cap Fund is a suitable choice.
Whichever flexi-cap fund you consider, make sure you have an investment horizon of at least around 5 years and a high-risk appetite.
In volatile markets, as we’re experiencing currently, making a staggered lump sum is advisable, or even better, taking the Systematic Investment Plan (SIP) route when planning for your envisioned financial goals. The inherent rupee cost-averaging feature shall help mitigate the impact of market volatility and potentially compound wealth over time.
Happy investing!
Note: We have relied on data from www.valueresearchonline.com, www.financialexpress.com, and the factsheets published by the respective fund houses throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
Returns data as of 12 June 2026. Direct Plan and Growth Option Considered. The Risk Measures have been calculated using calendar month returns for the last three years. The Risk Measures have been calculated using calendar month returns for the last three years and are as of 31 May 2026.
Standard Deviation is a measure of the total volatility of the fund. The Sharpe Ratio is a measure of risk-adjusted return that shows how much excess return an investment generates for each unit of risk taken.
Portfolio data as of 31 May 2026. The average of the price-to-book value ratios and price-to-equity ratios of all underlying stock holdings in proportion to their portfolio weights is considered.
Disclaimer:
Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Past returns are not indicative of future returns. Please consult your financial advisor before investing.
Rounaq Neroy has over 20 years of experience in the financial markets and investments. He is a close observer of the Indian economy and writes deeply on the capital markets, mutual funds, stocks, precious metals, asset allocation, wealth management, and investment strategy. His editorials provide interesting, actionable investment ideas to guide readers in the journey of wealth creation and make wise decisions. Rounaq was the Head of Content at PersonalFN (Quantum Information Services Pvt. Ltd.), which also owns Equitymaster.com – India’s oldest and trusted equity research house.