Active managers of mutual funds had a mixed experience in beating the benchmark indices in calendar year 2025.
While many of actively managed large-cap and equity-linked saving schemes funds struggled to beat their benchmarks, actively managed mid and small-cap funds delivered a better outperformance, marking their best relative results since 2014, according to the SPIVA India report prepared by S&P Dow Jones Indices.
Nearly 75 per cent of the actively managed large-cap funds underperformed their benchmark indices in the last one year. Over 3, 5 and 10 years the underperformance was 74 per cent, 84 per cent and 76 per cent, respectively.
The S&P India LargeMidCap climbed 8.9 per cent in 2025, while Indian Equity Large-Cap funds gained 7.3 per cent. In the same period, Nifty 50 has delivered a return of 10 per cent.
However, actively managed mid and small cap funds have performed better than their benchmarks. The underperformance rate was just 12 per cent over the one-year period. Over 3, 5 and 10 year period, the underperformance was 41 per cent, 46 per cent and 79 per cent, according to the report.
The S&P India SmallCap, plunged 8 per cent in 2025, while equity mid and small-cap funds dropped 0.7 per cent in the same period.
The Nifty Smallcap 100 index declined 9 per cent while the Nifty Midcap 150 jumped 5 per cent.
Chirag Muni, Executive Director, Anand Rathi Wealth said nearly 48 per cent of large-cap funds have outperformed Nifty 50 between 2018 and 2025, and the funds that did outperform generated an average alpha of about 3.35 per cent.
This suggests that while benchmark outperformance has not been very strong, there is still potential for alpha generation in large caps, he said.
Investors are already shifting to passive strategies which replicate an index and do not have the ability to generate alpha, he added.
An exposure of about 55 per cent in large caps and the rest in mid and small caps can help create stability while still capturing growth opportunities in the market, said Muni.
While most of these MF schemes have underperformed, the benchmark comparison itself is skewed, said CEO of a leading fund house.
The MF schemes have various restrictions including 10 per cent cap on investment in single stock and limitation on sector-specific exposure, but such restrictions are not there for benchmark indices, he added.
For the convenience and better understanding of investors, the regulator will do well to construct benchmark indices with same regulations as applicable for MF schemes, he said.
Incidentally, the small-cap funds attracted the highest inflow of Rs 52,321 crore last year even as SEBI warned investors of high valuations. Mid-cap funds received investments of Rs 49,939 crore while large-cap funds got Rs 25,483 crore last year, according to the Association of Mutual Funds in India data.
Published on March 17, 2026