For many mutual fund investors, double-digit returns have gradually become an expected outcome, particularly after several years of strong market performance. But the latest data from the Securities and Exchange Board of India (SEBI) offers a reality check.
The number of mutual fund schemes that delivered negative annual returns jumped to 731 in 2025-26, from 243 in the previous year. At the same time, the number of schemes delivering more than 10% returns fell from 304 to just 198.
SEBI’s scheme-wise annual return table covered 1,841 schemes in 2025-26, of which 731, or nearly 40%, delivered negative returns. In comparison, 243 out of 1,617 schemes covered in the table had negative returns in 2024-25.
The data does not mean that mutual funds as an asset class have stopped working. Instead, it shows that returns can vary sharply across schemes and market conditions, and investors may need to be more realistic about expecting 12-15% returns every year.
Negative-return schemes more than tripled
SEBI’s scheme-wise data shows how sharply the return distribution changed in 2025-26.
The number of schemes with annual returns of -5% to 0% rose from 172 to 492. Those with returns between -10% and -5% increased from 41 to 146.
Even more worrying, the number of schemes that lost 10% or more increased from 30 to 93.
At the other end, schemes delivering 5-10% returns fell from 852 to 539, while those delivering more than 10% dropped from 304 to 198.
| Annual return | 2024-25 | 2025-26 |
| 10% or more loss | 30 | 93 |
| -10% to -5% | 41 | 146 |
| -5% to 0% | 172 | 492 |
| 0% to 5% | 218 | 373 |
| 5% to 10% | 852 | 539 |
| Above 10% | 304 | 198 |
(Source: SEBI report)
SEBI described the overall environment as a “subdued return environment” driven by market volatility.
So, is a 12-15% return expectation unrealistic?
The SEBI report itself does not prescribe a return expectation for investors. But its scheme-level data makes one thing clear: a double-digit return was far from a uniform outcome across mutual fund schemes in 2025-26.
Only 198 schemes in the report’s return table delivered more than 10% during the year. That compares with 304 schemes a year earlier. Meanwhile, 731 schemes were in negative territory.
This is why investors need to be careful about treating a past return number as something they can automatically expect in the future.
The report’s figures are for the Direct Plan Growth Option of schemes, and the 731 figure covers mutual fund schemes in the report’s scheme-wise annual-return table, not just equity funds.
The interesting part: investors did not stop investing
Despite the weaker return environment, India’s mutual fund industry continued to attract investors.
SEBI says total mutual fund AUM more than doubled over five years, rising from Rs 31.43 lakh crore in March 2021 to Rs 73.7 lakh crore in March 2026.
It is important to note that the SEBI data refers to financial year 2025-26, which ended in March 2026, while we are now in August 2026 and several industry metrics have changed since then. The overall mutual fund industry has continued to grow significantly.
As of July 31, 2026, the industry’s AUM stood at Rs 85.59 lakh crore, compared with Rs 73.7 lakh crore reported by SEBI for March 2026. This means the industry has added nearly Rs 11.9 lakh crore in AUM in just four months, underscoring how quickly the mutual fund landscape has changed since the period covered by the SEBI report.
During 2025-26, the number of unique mutual fund investors increased 13.2% to 6.1 crore, from 5.4 crore.
The industry also added 3.9 crore folios, taking the total number of mutual fund folios to 27.4 crore. Individual investors accounted for 97.7% of all folios and 58.3% of total AUM.
This means the growth of mutual funds is not slowing simply because returns have become more challenging.
SIP investors continued to put in more money
SIPs provide another interesting picture.
The number of contributing SIP accounts increased from 10.05 crore to 10.45 crore during 2025-26.
More importantly, the average monthly net SIP contribution increased 25.8%, from Rs 13,052 crore to Rs 16,413 crore.
SIP AUM also rose from Rs 13.35 lakh crore to Rs 15.11 lakh crore, while gross SIP inflows increased from Rs 2.89 lakh crore to Rs 3.50 lakh crore.
So while the return environment became tougher, investors continued to invest through the SIP route.
There is another number that stands out: 7.2 crore new SIPs were registered during 2025-26, while 6.8 crore were either discontinued or reached maturity. SEBI does not describe all of these as investors stopping their SIPs, since the number also includes SIPs that matured.
For investors, this is an important reminder that simply starting a SIP is not the same as staying invested through different market cycles.
More money is going into equity, too
The increase in mutual fund participation was not restricted to debt-oriented investments.
According to SEBI, during 2025-26, the equity segment recorded net purchases of Rs 5.6 lakh crore, while the debt segment reported net sales of Rs 2.5 lakh crore.
Equity deployment by mutual funds increased 11.6%, from Rs 41.99 lakh crore in 2024-25 to Rs 46.85 lakh crore in 2025-26. Debt deployment increased 6.7%.
This is important because it shows that investors continued to allocate money towards equity-oriented investments even as the overall distribution of scheme returns weakened.
Smaller cities are joining the mutual fund rush
The expansion of the investor base is also spreading beyond the big cities.
SEBI says the number of unique investors in Tier-II cities increased 37.6%, from around 1 crore to 1.4 crore during 2025-26.
Tier-III cities remained the largest contributor to the investor base, with investors increasing from 3.3 crore to 3.4 crore.
For a growing number of first-time investors, therefore, the question is not simply whether mutual funds are attractive, but how much return they should realistically expect and what level of risk they are taking to achieve it.
Higher return can also come with higher liquidity risk
SEBI’s stress-test data for mid-cap and small-cap funds provides another useful warning for investors chasing higher returns.
The stress tests simulate extreme market conditions and examine how quickly a fund can liquidate part of its portfolio when faced with high redemption pressure.
In March 2026, the top 10 mid-cap schemes by AUM took an average of 17 days to liquidate 50% of their portfolios. For the top 10 small-cap funds, the average was 38 days.
For the top five schemes, the figures were even higher — 23 days for mid-cap funds and 51 days for small-cap funds. SEBI said this highlighted concentration risks in larger funds.
This does not mean investors should avoid mid-cap or small-cap funds. But it does show why chasing the highest historical return without considering the underlying risks can be problematic.
Investors should look beyond one-year returns
The latest SEBI data does not suggest that investors should abandon mutual funds because 731 schemes delivered negative returns in one year.
In fact, the industry’s AUM, investor base and SIP flows all continued to grow.
The bigger lesson is about expectations.
A mutual fund is not a fixed-return product. Even within the same broad category, different schemes can deliver very different outcomes in a particular year. SEBI’s latest numbers show that clearly: while 198 schemes delivered more than 10% returns, 731 were in negative territory.
For investors, therefore, the better question may not be “which mutual fund will give me 12-15%?”
It should be: “What return is realistic for my goal, how much volatility can I tolerate, and can I stay invested when returns are weak?”
That shift in thinking becomes particularly important as more Indians — including first-time investors from smaller cities — enter mutual funds and increasingly use SIPs to build long-term wealth.
Disclaimer: This story is based primarily on data and information contained in SEBI’s Annual Report 2025-26, released on August 6, 2026. The scheme-wise return data cited in the story pertains to FY 2025-26, which ended on March 31, 2026. Mutual fund AUM and other industry-level figures mentioned for July 2026 are based on data available after the end of the period covered by the SEBI report and are included to provide a more current picture of the industry. Mutual fund returns vary across schemes and market conditions, and past performance does not guarantee future returns. Investors should consider their investment goals, risk appetite, time horizon and scheme-specific risks before making investment decisions.
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