The year 2025 marked a notable shift from the broad-based gains of 2024, delivering an uneven experience for Indian mutual fund investors, with returns ranging from –20 per cent to 178 per cent. Equity performance diverged sharply, with large-cap funds displaying relative resilience, while small-cap strategies struggled amid heightened volatility. Thematic funds reflected sector-specific cycles rather than broad market momentum. Debt funds saw early gains fade as the year progressed, compressing returns in longer-duration categories, while short-term funds provided stability comparable to bank deposits. Global funds recovered well, and gold and silver ETFs emerged as the strongest-performing asset classes.
This round-up evaluates equity, debt, hybrid, commodity and international funds through the lens of returns, flows and portfolio trends in 2025, using data compiled from ACEMF. Regular plans are considered for calculating average category returns. This round-up is a snapshot of 2025 category trends and is not an investment recommendation.
Equity funds
The Indian equity market offered limited cheer in 2025. After peaking on September 26, 2024, the Nifty 500 index corrected sharply before staging a V-shaped recovery from the March 2025 lows. While the Nifty 100 Total Return Index (TRI) gained about 10 per cent year-to-date (YTD) period ended December 23, 2025, gains were concentrated in select large-cap stocks, supported by relative stability in banking and industrials. Persistent global uncertainty and sustained foreign institutional investor outflows capped broader upside.
Mid- and small-cap indices experienced significantly higher volatility. The Nifty Midcap 150 and Nifty Smallcap 250 delivered returns of 6.3 per cent and –5.8 per cent, respectively. Mid-caps entered a consolidation phase after a prolonged multi-year rally, while small-caps witnessed meaningful draw-downs, as overheated segments underwent valuation resets.
For the YTD period ending December 23, 2025, large-cap funds led with returns of 7.5 per cent, ahead of flexi-cap (3.4 per cent), mid-cap (2.4 per cent) and small-cap funds (–4.1 per cent). This marked a sharp contrast to 2024, when the respective categories delivered 15 per cent, 20 per cent, 29 per cent and 27 per cent.
SIP performance: Systematic investment plans (SIPs) once again demonstrated their structural advantage in volatile markets by accumulating more units during corrections. SIP XIRRs stood at 13.4 per cent for large-cap funds, 12.8 per cent for mid-cap funds, 11.3 per cent for flexi-cap funds and 6.4 per cent for small-cap funds.
Among large-cap funds, DSP MF (18.5 per cent), Mirae Asset MF (16 per cent) and Bank of India MF (16 per cent) delivered the highest SIP returns. In the mid-cap segment, ICICI Prudential MF (23 per cent), Mirae Asset MF (21 per cent) and WhiteOak Capital MF (19.6 per cent) led performance. Small-cap SIP leaders included TRUST MF (16 per cent), DSP MF (11.8 per cent) and Quantum MF (11 per cent).
Sector and thematic funds: Performance of these funds in 2025 reflected a clearly cyclical outcome. Transportation (18 per cent) and Banks & Financial Services (16 per cent) led returns, supported by a capex revival and strong credit growth. In contrast, defensive and export-oriented themes struggled. Technology (–1.9 per cent) and Pharma & Health Care (–3.2 per cent) were weighed down by weak global growth, pricing pressures and earnings downgrades. Overall, sectors aligned with domestic economic momentum were rewarded, while globally-linked themes underperformed.
Drawdowns: Large-cap funds contained the correction relatively well during the market trough on March 4, 2025, when the Nifty 500 hit its low following the decline that began on September 26, 2024. From the start of the year to March 4, large-cap funds fell less than 9 per cent, compared with declines of about 13 per cent in flexi-cap funds, 16 per cent in mid-cap funds, and nearly 20 per cent in small-cap funds.
Active fund underperformance: Data from 2025 highlighted growing challenges for active fund managers, with widespread benchmark underperformance across equity categories. Considering the overall actively-managed equity fund universe, transportation (83 per cent), small-cap (72 per cent) and technology (67 per cent) categories saw relatively higher proportions of schemes beating their benchmarks, reflecting stock-picking opportunities amid volatility.
However, core market-cap based categories painted a stark picture: Only 6 per cent of large-cap funds outperformed their benchmarks, while multi-cap, flexi-cap and mid-cap categories hovered near 20 per cent. Meanwhile, contra, ESG, manufacturing, MNC, PSU and quant categories recorded zero outperformance, underscoring shrinking alpha potential and the rising relevance of passive strategies. For the study, returns of regular plans are compared with their respective benchmarks.
Portfolio trends: Among widely-held large-cap stocks, Shriram Finance, TVS Motor Company and Eicher Motors delivered YTD gains of 67 per cent, 52 per cent and 50 per cent, respectively. Conversely, Siemens, Trent and RED declined 53 per cent, 39 per cent and 30 per cent, respectively.
In the mid-cap segment, L&T Finance, Aditya Birla Capital and Laurus Labs surged 120 per cent, 94 per cent and 76 per cent, while Kaynes Technology India, Oracle Financial Services Software and Indian Renewable Energy Development Agency fell 46 per cent, 39 per cent and 37 per cent. Among small-caps, Force Motors, Gabriel India and RBL Bank gained 177 per cent, 109 per cent and 94 per cent, while Aditya Birla Fashion and Retail, Tejas Networks and Praj Industries declined sharply.
Sector rotation: Mutual fund exposure to Automobiles—Trucks/LCV and Paints—in terms of investment value surged 412 per cent and 194 per cent, reaching ₹19,759 crore and ₹27,630 crore, respectively, as of November 2025. Other sectors witnessing a 50-66 per cent rise in allocations included fintech, investment finance, e-commerce, NBFCs and PSU banks. In contrast, exposure to air conditioners, mining and minerals, and textiles declined 13-20 per cent over the year.
Net flows: In 2025, flexi-cap, small-cap and mid-cap funds recorded net AUM increases of ₹70,960 crore, ₹48,497 crore and ₹45,763 crore, respectively. Within flexi-caps, PPFAS alone added ₹42,243 crore, taking its corpus to ₹1.3 lakh crore by November.
In mid-caps, HDFC Midcap and Motilal Oswal Midcap added ₹14,202 crore and ₹11,582 crore, respectively. Small-cap funds such as Bandhan, Nippon India, HDFC and Quant saw inflows ranging from ₹3,400 crore to ₹8,400 crore. In contrast, ELSS and Dividend Yield funds recorded net outflows of ₹1,312 crore and ₹203 crore, respectively.
Debt Funds
In 2025, the RBI decisively pivoted to an easing cycle, cutting the repo rate by 125 bps—from 6.5 per cent to 5.25 per cent. This move was supported by benign inflation, with CPI staying well below the 4-per cent target for most of the year and hitting historic lows in October-November, giving the central bank ample room to reduce rates without fuelling price pressures. Concurrently, GDP growth expectations strengthened, with the RBI projecting around 7.3 per cent for FY26.
G-Sec yields generally softened on policy easing and liquidity support, though supply pressures occasionally pushed them higher. The 10-year benchmark eased from 6.85 per cent early in the year to 6.2 per cent by June, boosting long-duration funds such as gilt and dynamic bond funds. However, yields later climbed to 6.7 per cent due to heavy debt supply, fiscal concerns and rupee depreciation, eroding earlier gains. By December 23, long-duration, gilt and dynamic bond funds posted modest YTD returns of 2.9 per cent, 3.7 per cent and 5.3 per cent, respectively. In contrast, these categories had delivered 8-9 per cent returns in 2024 amid rate-cut expectations and a favourable macro backdrop.
Liquidity oscillated—tight in January 2025, then surplus as the RBI deployed VRRs, OMOs and swaps. Liquid and money market funds earned 6-7 per cent in 2025, aided by overnight rates aligning with policy rates and sustained RBI liquidity absorption. Corporate bond, short-duration and banking & PSU funds benefited from accrual and moderate duration, delivering 7.2-7.5 per cent.
Notably, very short-term to medium-duration categories—money market, low duration, corporate bond and short-duration funds—attracted strong net inflows of ₹1.1 lakh crore, ₹33,585 crore, ₹28,800 crore and ₹19,413 crore, respectively, for the year ended November 2025. In contrast, gilt, banking and PSU, credit risk, and long-duration fund categories recorded net outflows of ₹4,884 crore, ₹3,930 crore, ₹2,476 crore and ₹2,105 crore, respectively.
With 23 per cent growth, 2025 marked the second consecutive year in which the overall debt fund universe recorded a notable increase in AUM after 2018. As of November 2025, debt fund AUM stood at ₹19.4 lakh crore.
Gold and Silver ETFs
Gold and silver ETFs were standout performers in 2025. For the YTD, silver surged 178 per cent, far outpacing gold’s 78 per cent return. Globally, silver rose up to 160 per cent YTD as strong industrial demand (solar, electronics and EVs), shrinking inventories and speculative flows combined with expectations of Fed rate cuts.
Gold also delivered an extraordinary year as investors sought a hedge against macro uncertainty, weaker US dollar expectations and prospective rate cuts, lifting gold ETF returns and pushing domestic premiums higher during India’s festival season.
Silver ETFs’ trading volumes outpaced gold ETFs in 2025: Silver ETFs witnessed an explosive surge in trading activity across both the BSE and NSE in 2025, overtaking gold ETFs. YTD to December 23, 2025, total traded value in silver ETFs stood at ₹1.3 lakh crore—up 560 per cent from ₹18,948 crore a year earlier. In comparison, gold ETFs recorded a traded value of ₹1.13 lakh crore during YTD 2025, marking a 329 per cent increase year on year.
Within silver ETFs, Nippon India Silver ETF led the category with an average daily trading volume of ₹282 crore in 2025, followed by ICICI Prudential Silver ETF at ₹59 crore and HDFC Silver ETF at ₹37 crore.
Among gold ETFs, Nippon India ETF Gold BeES topped the charts with an average daily volume of ₹228 crore, followed by SBI Gold ETF at ₹47 crore and ICICI Prudential Gold ETF at ₹45 crore.
Hybrid funds
Performance of hybrid funds diverged sharply in 2025, both within and across categories, reflecting differences in equity exposure, dynamic allocation models and the use of commodities such as gold and silver.
At the category level, multi-asset allocation funds emerged as standout performers, delivering an average return of about 16.4 per cent in 2025. These funds benefited from diversified exposure across equities, debt and commodities—particularly gold and silver—which played a crucial role in cushioning volatility and enhancing returns. Top-performing schemes such as DSP, Invesco, Kotak and Mahindra Manulife Multi Asset funds delivered returns of 20-23 per cent, highlighting the payoff from disciplined rebalancing and commodity allocation in a year when pure equity returns were uneven.
In contrast, aggressive hybrid funds, which typically maintain 65-80 per cent equity exposure, delivered a modest category average return of around 5.7 per cent. Performance dispersion was wide. A few funds, led by ICICI Prudential Equity & Debt Fund and SBI Equity Hybrid Fund, generated double-digit returns of 12-13 per cent. However, a long tail of schemes delivered mid-single-digit returns, while some slipped into negative territory, including Bank of India Mid & Small Cap Equity & Debt Fund and JM Aggressive Hybrid Fund.
Balanced advantage funds, designed to adjust equity exposure based on valuation and market indicators, also delivered subdued outcomes, with an average return of about 5.4 per cent. While leaders such as ICICI Prudential Balanced Advantage Fund delivered over 12 per cent, many schemes ended the year with low single-digit returns, and a few posted negative performance, including the Motilal Oswal Balanced Advantage Fund.
Investor flows in 2025 clearly favoured asset-allocation-led hybrid strategies. Multi-asset allocation funds attracted the highest inflows at ₹39,631 crore. Balanced advantage funds saw steady inflows of ₹15,421 crore, while aggressive hybrid funds drew a relatively modest ₹11,530 crore amid muted equity returns.
International funds
International funds in 2025 reinforced their role as strategic diversifiers rather than tactical return-chasing tools for Indian investors. Performance across the category was widely dispersed, with returns ranging from 9 per cent to an exceptional 178 per cent, underscoring sharp regional and thematic divergences.
US equity funds remained the backbone of international allocations, with returns broadly ranging between 13 per cent and 34 per cent during the year. Diversified US market exposures—such as S&P 500, NASDAQ 100 and total market strategies—delivered returns of 20-28 per cent. Funds tracking the NASDAQ 100 and FANG+ indices benefited from sustained leadership in artificial intelligence, cloud computing and semiconductor ecosystems, even as valuations remained elevated. For instance, the Mirae Asset NYSE FANG+ ETF delivered about 28 per cent, while the Motilal Oswal Nasdaq 100 ETF gained 27 per cent.
Within US-focused funds, the DSP US Specific Equity Omni FoF led with returns of about 34 per cent, followed by the SBI US Specific Equity Active FoF at 29 per cent. In contrast, broad-based active funds such as Nippon India US Equity Opportunities, Franklin US Opportunities Equity Active FoF and ICICI Prudential US Bluechip Equity Fund lagged, delivering returns of 13-17 per cent.
The DSP World Gold Mining Overseas Equity Omni FoF delivered an extraordinary 178 per cent YTD return, driven by a sharp rally in gold prices and the operating leverage inherent in mining companies.
Asia-focused allocations also rewarded selective risk-taking. China-oriented funds, including Axis Greater China Equity, Nippon India Hang Seng BeES and Edelweiss Greater China Equity, delivered returns of around 37 per cent, while the Nippon India Taiwan Equity Fund gained about 46 per cent, benefiting from strength in semiconductors and platform technology businesses, the Edelweiss Europe Dynamic Equity Offshore Fund returned about 50 per cent, the HSBC Brazil Fund gained 54 per cent and the HSBC Global Emerging Markets Fund delivered roughly 41 per cent.
From a regulatory standpoint, overseas investments by Indian mutual funds remain governed by a defined framework. The RBI allows the industry to invest up to $7 billion in overseas securities. This cap has acted as a natural constraint on incremental flows, periodically resulting in subscription suspensions, even as investor appetite for global diversification continues to grow.
This cap has acted as a natural constraint on incremental flows, periodically resulting in subscription suspensions, even as investor appetite for global diversification continues to grow. Investors seeking international exposure must stay alert to fund subscription reopenings, which are often hard to track. Meanwhile, six ETFs tracking US and Hang Seng indices trade on exchanges at steep premiums of 5–19 per cent to NAV due to strong demand and limited market making. Investors should avoid secondary-market purchases for now.
Published on December 27, 2025
