India’s mutual fund industry continues to witness strong participation from retail investors.
According to the Association of Mutual Funds in India (AMFI), the industry’s assets under management (AUM) stood at Rs 81.58 trillion as of May 2026, which highlights the increasing preference for mutual funds as a long-term wealth creation tool.
The table below highlights the performance of mutual funds with strong historical performance across the periods:
Historical Returns Comparison
| Fund | 1 Year (%) | 3 Years (%) | 5 Years (%) |
| Motilal Oswal Midcap Fund | -7.6 | 18.18 | 21.94 |
| Invesco India Smallcap Fund | 6.33 | 22.43 | 19.75 |
| Invesco India Midcap Fund | 8.26 | 24.3 | 19.93 |
| Bandhan Small Cap Fund | 6.56 | 30.39 | 23.06 |
| Nippon India Growth Mid Cap Fund | 8.68 | 23.74 | 21.19 |
Source: Funds Factsheets (May 2026)
While historical returns provide a useful starting point, they don’t tell the complete story.
In this editorial, we discuss five mutual funds of 2026, looking at their investment strategy, portfolio, sector allocation, and historical performance to help you decide whether they are worth adding to your watchlist.
#1 Motilal Oswal Midcap Fund
First is Motilal Oswal Midcap Fund which is an open-ended equity mutual fund that primarily invests in mid-cap companies.
As of May 2026, the fund manages assets worth Rs 364,582.1 million (m), while its average assets under management (AAUM) stood at Rs 363,860 million during the month.
If we look at the key risk metrics, the fund’s beta of 0.9 indicates that it has historically moved less than the broader market.
Its 20% standard deviation reflects the portfolio’s volatility, while the Sharpe Ratio of 1.1 indicates that the fund has generated relatively strong risk-adjusted returns over the measured period.
How Does the Fund Invest?
The fund follows a quality-focused mid-cap investment strategy with the portfolio remaining largely focused on mid-cap stocks, which account for 75.5% of the portfolio.
Large-cap companies make up 17.9%, while the remaining 6.6% is invested in small-cap stocks.
This allocation keeps the portfolio aligned with its mid-cap objective while adding some stability through select large-cap companies.
Top Sector Exposure
| Sector | Allocation (%) |
| Capital Markets | 15 |
| IT – Software | 11.9 |
| Finance | 11.1 |
| Financial Technology (Fintech) | 9.8 |
| Consumer Durables | 9.6 |
Source: Funds Factsheet
The fund has meaningful exposure to sectors that are closely linked to India’s domestic growth story.
Capital markets, finance, and fintech together account for a significant portion of the portfolio, while the fund also maintains allocations to technology and consumer-focused businesses.
These sectors could benefit from rising financial participation, increasing digital adoption, and higher consumer spending as the economy continues to expand.
Top Stock Holdings
| Stock | Weight (%) |
| One 97 Communications | 7.3 |
| Coforge | 6.1 |
| Kalyan Jewellers India | 6 |
| KEI Industries | 5.8 |
| Eternal | 5.8 |
Source: Funds Factsheet
The fund’s holdings represent a mix of technology, financial services, consumer, and industrial businesses.
Several of these companies operate in sectors that are benefiting from structural trends such as digitalisation, rising consumption, and increasing participation in financial markets.
How Has the Fund Performed Over Time?
The table below shows how a lump sum investment of Rs 10,000 would have grown over different investment periods.
Performance of a Rs 10,000 Investment
| Period | Scheme CAGR (%) | Scheme Final Value (Rs) | Benchmark CAGR (%) | Benchmark Final Value (Rs) |
| 1 Year | -7.60% | 9,242 | 7.51% | 10,749 |
| 3 Years | 18.18% | 16,497 | 22.14% | 18,210 |
| 5 Years | 21.94% | 26,947 | 19.21% | 24,061 |
| Since Inception | 19.85% | 92,149 | 20.78% | 1,01,333 |
Source: Funds Factsheet
Over five years, a Rs 10,000 investment would have grown to Rs 26,947, compared with Rs 24,061 for the benchmark.
This shows that despite periods of short-term underperformance, the fund has historically created higher wealth than its benchmark over longer investment horizons.
However, the recent one-year performance also highlights that mid-cap funds can witness periods of volatility, making a longer investment horizon important while evaluating their performance.
#2 Invesco India Smallcap Fund
Second is Invesco India Smallcap Fund which is an open-ended equity mutual fund that primarily invests in small-cap companies.
The fund aims to generate long-term capital appreciation by identifying businesses with strong growth potential, healthy returns on capital, and the ability to create value over time.
Unlike large-cap and mid-cap funds, this fund focuses on relatively smaller companies that are still in the early stages of their growth journey.
While these companies can offer higher growth potential, they may also experience greater volatility over the short term.
How Does the Fund Invest?
The fund follows a bottom-up investment approach, where individual stock selection takes priority over sector allocation.
It looks for quality businesses with sustainable competitive advantages and typically maintains a diversified portfolio of around 55 to 75 stocks.
The portfolio remains largely invested in equities, with nearly 95% allocated to equity and equity-related instruments.
Top Sector Exposure
| Sector | Allocation (%) |
| Healthcare Services | 12.09 |
| Banks | 10.15 |
| Pharmaceuticals & Biotechnology | 8.66 |
| Consumer Durables | 7.73 |
| Retailing | 7.1 |
Source: Funds Factsheet
The fund has meaningful exposure to healthcare and financial services, while also maintaining allocations to consumer-focused businesses.
It also invests across pharmaceuticals and retail companies, providing diversification within the small-cap universe.
These sectors could benefit from rising healthcare spending, improving consumer demand and continued economic growth over the long term.
Top Stock Holdings
| Stock | Weight (%) |
| Sai Life Sciences | 4.89 |
| Amber Enterprises India | 4.85 |
| Aditya Infotech | 4.14 |
| Krishna Institute of Medical Sciences | 4.12 |
| Max Healthcare Institute | 3.77 |
Source: Funds Factsheet
The fund’s top holdings are spread across healthcare, consumer durables, and technology-related businesses. No single stock accounts for more than 5% of the portfolio, helping reduce concentration risk.
This diversified portfolio allows the fund to participate in multiple long-term growth themes while limiting dependence on any one company.
How Has the Fund Performed Over Time?
The table below shows how a lump sum investment of Rs 10,000 would have grown over different investment periods.
Performance of a Rs 10,000 Investment
| Period | Scheme CAGR (%) | Scheme Final Value (Rs) | Benchmark CAGR (%) | Benchmark Final Value (Rs) |
| 1 Year | 6.33% | 10,632 | 1.19% | 10,118 |
| 3 Years | 22.43% | 18,342 | 18.75% | 16,739 |
| 5 Years | 19.75% | 24,610 | 16.71% | 21,644 |
| Since Inception | 21.18% | 42,920 | 17.86% | 34,775 |
Source: Funds Factsheet
The fund has outperformed its benchmark across all the periods shown above. Over five years, a Rs 10,000 investment would have grown to Rs 24,610, compared with Rs 21,644 for the benchmark.
Its performance since inception also highlights its ability to generate higher returns than the benchmark over the long term.
However, like most small-cap funds, investors should be prepared for periods of higher volatility.
#3 Invesco India Midcap Fund
Third is Invesco India Midcap Fund which is an open-ended equity mutual fund that primarily invests in mid-cap companies.
As of May 2026, the fund manages assets worth Rs 123,967.5 m, while its average assets under management (AAUM) stood at Rs 122,252.9 m during the month.
If we look at the key risk metrics, the fund’s beta of 1.01 indicates that it has historically moved broadly in line with the market.
Its standard deviation of 5.61% reflects the volatility experienced by the portfolio, while the Sharpe Ratio of 0.27 measures the fund’s risk-adjusted returns over the observed period.
How Does the Fund Invest?
The fund follows a mid-cap investment strategy by investing at least 65% of its portfolio in mid-cap companies.
The objective is to identify businesses with strong growth potential while maintaining a diversified portfolio across sectors.
Mid-cap stocks account for 63.98% of the portfolio, while 17.88% is invested in large-cap companies and 16.72% in small-cap stocks.
This allocation allows the fund to remain focused on mid-cap opportunities while benefiting from the stability of large-cap companies and the growth potential of select small-cap businesses.
Top Sector Exposure
| Sector | Allocation (%) |
| Banks | 13.73 |
| Retailing | 11.72 |
| Healthcare Services | 10.54 |
| Realty | 8.13 |
| Pharmaceuticals & Biotechnology | 7.57 |
Source: Funds Factsheet
The fund has meaningful exposure to banking, healthcare, and consumer-oriented businesses, while also maintaining allocations to sectors such as real estate and pharmaceuticals.
These sectors could benefit from rising financial inclusion, increasing healthcare spending, higher consumer demand, and economic growth over the long term.
Top Stock Holdings
| Stock | Weight (%) |
| BSE | 6.05 |
| Prestige Estates Projects | 5.85 |
| Federal Bank | 5.2 |
| AU Small Finance Bank | 4.72 |
| Eternal | 4.48 |
Source: Funds Factsheet
The fund’s top holdings represent a mix of financial services, real estate, healthcare and consumer businesses.
The portfolio is reasonably diversified, with no single stock accounting for an excessively large share of the overall portfolio.
How Has the Fund Performed Over Time?
The table below shows how a lump sum investment of Rs 10,000 would have grown over different investment periods.
Performance of a Rs 10,000 Investment
| Period | Scheme CAGR (%) | Scheme Final Value (Rs) | Benchmark CAGR (%) | Benchmark Final Value (Rs) |
| 1 Year | 8.26% | 10,823 | 5.79% | 10,578 |
| 3 Years | 24.30% | 19,192 | 21.21% | 17,798 |
| 5 Years | 19.93% | 24,800 | 18.31% | 23,173 |
Source: Funds Factsheet
The fund has outperformed its benchmark across all the time periods shown above. Over five years, a Rs 10,000 investment would have grown to Rs 24,800, compared with Rs 23,173 for the benchmark.
This suggests that the fund has consistently delivered higher returns than its benchmark over both the medium and long term, although investors should remember that past performance does not guarantee future returns.
#4 Bandhan Small Cap Fund
Fourth is Bandhan Small Cap Fund which is an open-ended equity mutual fund that primarily invests in small-cap companies.
As of May 2026, the fund manages assets worth Rs 272,191.30 m, while its average assets under management (AAUM) stood at Rs 266,005.60 m during the month.
If we look at the key risk metrics, the fund’s beta of 0.92 indicates that it has historically moved slightly less than the broader market.
Its standard deviation of 20.85% reflects the volatility experienced by the portfolio, while the Sharpe Ratio of 1.11 suggests that the fund has delivered relatively strong risk-adjusted returns over the measured period.
How Does the Fund Invest?
The fund follows a three-pronged investment strategy based on quality, growth and reasonable valuation.
It focuses on identifying fundamentally strong small-cap companies while maintaining a diversified portfolio across sectors.
Small-cap stocks account for 69.32% of the portfolio, while 14.76% is invested in mid-cap companies and 5.77% in large-cap stocks.
The remaining allocation is held in cash and cash equivalents, providing the fund with flexibility to manage liquidity and deploy capital when attractive opportunities arise.
Top Sector Exposure
| Sector | Allocation (%) |
| Financial Services | 27.5 |
| Healthcare | 10.6 |
| Capital Goods | 9.1 |
| Realty | 8.4 |
| Consumer Durables | 6.6 |
Source: Funds Factsheet
The fund has significant exposure to financial services, which accounts for more than one-fourth of the portfolio. It also maintains meaningful allocations to healthcare, capital goods, real estate and consumer durables.
Top Stock Holdings
| Stock | Weight (%) |
| Sobha | 3.18 |
| REC | 3.1 |
| State Bank of India | 2.02 |
| LT Foods | 1.88 |
| Arvind | 1.72 |
Source: Funds Factsheet
The fund’s top holdings are spread across financial services, real estate, and manufacturing and consumer businesses. The top 10 holdings account for only about 18% of the portfolio, indicating a well-diversified investment approach.
The fund also has a portfolio turnover ratio of 0.22, suggesting that it follows a relatively long-term investment strategy with limited portfolio churn.
How Has the Fund Performed Over Time?
The table below shows how a lump sum investment of Rs 10,000 would have grown over different investment periods.
Performance of a Rs 10,000 Investment
| Period | Scheme CAGR (%) | Scheme Final Value (Rs) | Benchmark CAGR (%) | Benchmark Final Value (Rs) |
| 1 Year | 6.56% | 10,654 | 1.19% | 10,118 |
| 3 Years | 30.39% | 22,151 | 18.75% | 16,739 |
| 5 Years | 23.06% | 28,208 | 16.71% | 21,644 |
| Since Inception | 30.47% | 52,862 | 21.62% | 34,055 |
Source: Funds Factsheet
The fund has outperformed its benchmark across all the periods shown above. Over five years, a Rs 10,000 investment would have grown to Rs 28,208, compared with Rs 21,644 for the benchmark.
However, since it primarily invests in small-cap companies, investors should be prepared for relatively higher volatility and have a long-term horizon.
#5 Nippon India Growth Mid Cap Fund
Fifth is Nippon India Growth Mid Cap Fund which is an open-ended equity mutual fund that primarily invests in mid-cap companies.
As of May 2026, the fund manages assets worth Rs 474,154.10 m, making it one of the larger funds in the mid-cap category.
If we look at the key risk metrics, the fund’s beta of 0.94 indicates that it has historically moved slightly less than the broader market.
Its standard deviation of 18.1 reflects the volatility experienced by the portfolio, while the Sharpe Ratio of 0.97 suggests that the fund has generated relatively strong risk-adjusted returns over the measured period.
The fund also has a portfolio turnover ratio of 0.07, indicating a long-term investment approach with limited portfolio churn.
How Does the Fund Invest?
The fund follows a Growth at Reasonable Price (GARP) investment strategy, which focuses on identifying companies with strong growth potential that are available at reasonable valuations. The objective is to identify potential market leaders early and create long-term wealth.
The portfolio is invested in mid-cap companies, which account for 69% of the portfolio, where large-cap stocks contribute 21%, while the remaining 10% is invested in small-cap companies.
Top Sector Exposure
| Sector | Allocation (%) |
| Banks | 27.82 |
| Retailing | 15.08 |
| Finance | 6.96 |
| Electrical Equipment | 6.04 |
| Auto Components | 5.77 |
Source: Funds Factsheet
The fund has significant exposure to financial services, with banks and finance together accounting for a large share of the portfolio. It also maintains allocations to retailing, electrical equipment and auto components.
Top Stock Holdings
| Stock | Weight (%) |
| BSE | 3.32 |
| Fortis Healthcare | 2.68 |
| Federal Bank | 2.5 |
| AU Small Finance Bank | 2.28 |
| Bharat Forge | 2.25 |
Source: Funds Factsheet
The fund’s top holdings represent a mix of financial services, healthcare and manufacturing companies. The top 10 holdings account for around 23.4% of the portfolio, indicating a diversified investment approach rather than a high concentration in a few stocks.
This diversification allows the fund to participate in multiple long-term growth themes while reducing company-specific risk.
How Has the Fund Performed Over Time?
The table below shows how a lump sum investment of Rs 10,000 would have grown over different investment periods.
Performance of a Rs 10,000 Investment
| Period | Scheme CAGR (%) | Scheme Final Value (Rs) | Benchmark CAGR (%) | Benchmark Final Value (Rs) |
| 1 Year | 8.68% | 10,865 | 7.51% | 10,749 |
| 3 Years | 23.74% | 18,933 | 22.14% | 18,210 |
| 5 Years | 21.19% | 26,123 | 19.21% | 24,061 |
Source: Funds Factsheet
The fund has outperformed its benchmark across all the periods shown above. Over five years, a Rs 10,000 investment would have grown to Rs 26,123, compared with Rs 24,061 for the benchmark.
This suggests that the fund has consistently generated higher returns than its benchmark over the medium to long term.
Which Mutual Fund Should You Watch in 2026?
Historical performance can offer useful insights, but it should not be the only factor when evaluating a mutual fund.
As mid-cap and small-cap funds can be more volatile than large-cap funds, investors should also consider the fund’s investment strategy, portfolio allocation, risk profile, and investment horizon before making an investment decision.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here…
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