Active Mutual Funds Show Mixed Results Across Asset Classes

Passive Investing Gains Ground in India as Active Funds Struggle to Outperform

Passive investing has been steadily gaining ground in India, with assets under management (AUM) of passive funds standing at around Rs 15.24 lakh crore in February 2026, according to Association of Mutual Funds in India (AMFI) data. Meanwhile, active equity funds managed around Rs 35.39 lakh crore during the same period.

An analysis of active mutual funds across large-cap, mid-cap, and small-cap categories found that most large-cap funds struggled to outperform their benchmark indices over one-, three-, and five-year periods. Mid-cap and small-cap funds, however, showed better benchmark outperformance among select funds.

Large-cap Funds Struggle to Consistently Outperform

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Large-cap funds, which invest in India's biggest companies, showed limited benchmark outperformance across time periods. Out of 34 currently active large-cap funds, only 12 managed to beat the Nifty 100 TRI return of 11.03 percent over the last five years. The category average stood lower at 10.63 percent, suggesting most active funds failed to generate meaningful excess returns.

The trend remained similar over three years, where only 13 funds outperformed the benchmark return of 11.97 percent. The category average stood at 11.95 percent. Quant Large Cap Fund topped the category with a three-year CAGR of 15.57 percent.

Mid-cap Funds Show Better Benchmark Outperformance

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Mid-cap funds performed better than large caps when it came to beating their benchmark. Among 33 mid-cap funds analyzed, 12 outperformed the Nifty Midcap 150 TRI return of 8.60 percent over the last one year, though the category average stood lower at 7.45 percent.

Over three years, 10 funds beat the benchmark return of 23.27 percent. HSBC Midcap Fund led the category with a CAGR of 27.36 percent, while the category average stood at 21.03 percent.

Small-cap Funds Deliver the Strongest Benchmark Outperformance

Small-cap funds stood out as the strongest category for benchmark outperformance. Out of the funds analyzed, 24 outperformed the Nifty Smallcap 250 TRI return of 2.8 percent over the last one year, while the category average stood higher at 6.3 percent.

The trend remained strong over longer periods as well. Five funds beat the three-year benchmark return of 20.9 percent, while 13 funds outperformed the five-year benchmark return of 17.3 percent.

Conclusion

The numbers tell a pretty clear story. Beating the benchmark has become very difficult in large caps, where markets are heavily tracked and researched. But in mid-caps and small-caps, active fund managers still seem to be finding opportunities to outperform. That is why the active-versus-passive debate probably does not need an all-or-nothing answer. Different parts of the market may simply need different approaches.