Best Equity Mutual Funds
Equity mutual funds are designed to deliver returns by investing in stocks of publicly listed companies across various market capitalizations. Following SEBI’s guidelines, these funds must allocate at least 65% of their capital into equities and equity-related securities. The remaining 35% is strategically placed in money-market or debt instruments, offering a balanced approach to risk and returns. Explore some of the best equity mutual funds in 2025 here.
Types of Equity Mutual Funds
Here are the types of equity mutual funds based on the following factors:
- Market Cap-based: Large Cap, Mid Cap, Small Cap, Large and Mid Cap, Flexi Cap, Multi Cap
- Investment Type-based: Focused Funds, Dividend Yield, Value Funds
- Sectoral or Thematic-based: Technology, Financial Services, ESG (Environment, Social and Governance), Healthcare, Consumption, Energy, FMCG
- Index-based: Nifty 50, Nifty Next 50, Nifty Midcap, Nifty Smallcap, Global Index
- Tax-saving-based: ELSS (Equity-linked Saving Scheme) Funds
Tax on Equity Mutual Funds
The capital gains tax applicable on the best equity mutual funds varies based on the holding period. If you hold your funds for less than 1 year, a short-term capital gains tax (STCG) at the rate of 20% applies. In case you redeem your funds after 1 year, long-term capital gains tax applies at 12.5%, over ₹1.25 lakh.
Difference Between Equity and Debt Mutual Funds
Equity mutual funds usually invest in shares of companies with potential high returns, subject to market volatility. On the other hand, debt mutual funds invest in fixed-income securities including government securities, bonds or corporate debentures. As a result, the latter is a relatively low-risk investment option with lower potential returns.
An Overview of the Top Equity Mutual Funds
Here is a snapshot of the best equity mutual funds in India:
1. Parag Parikh Flexi Cap Fund
Parag Parikh Flexi Cap Fund (Direct Growth) invests 66.14% in shares of domestic equities of which 50.36%, 2.43% and 3.13% are in large cap, mid cap and small cap stocks. It has a debt component of 10.17% wherein 0.6% is in government securities and 9.57% is low risk securities.
- Asset Under Management: ₹88004.52 crore approximately
- Expense Ratio: 0.63%
- Investment Details: Equity (79.04%), Debt (10.17%), Others (10.79%)
- Launch Date: May 2013
- Exit Load: 1%
2. HDFC Midcap Opportunities Fund
HDFC Midcap Opportunities Fund (Direct Growth) invests 10.11% in large cap stocks, 45.51% in midcap stocks and 14.24% in small cap stocks. Thus, this fund invests 92.47% in domestic shares. You can check its benchmark's performance (Nifty Midcap 150 TRI) before investing.
- Asset Under Management: ₹67,578.59 crore approximately
- Expense Ratio: 0.83%
- Investment Details: Equity (92.47%), Others (7.53%)
- Launch Date: January 2013
- Exit Load: 1%
3. HDFC Flexi Cap Fund
HDFC Flexi Cap Fund (Direct Growth) strategically invests 88.37% in Indian equities, with 59.63% in large-cap, 3.96% in mid-cap and 3.98% in small-cap stocks. The remaining portion of the fund includes 0.8% in government securities.
- Asset Under Management: ₹64,124.15 crore approximately
- Expense Ratio: 0.81%
- Investment Details: Equity (88.37%), Debt (0.8%), Others (10.83%)
- Launch Date: January 2013
- Exit Load: 1%
4. ICICI Prudential Bluechip Fund
ICICI Prudential Bluechip Fund (Direct Growth) invests 91.91% in Indian shares, wherein 76.15%, 3.52% and 0.53% are in large, mid and small cap stocks. The debt component of the fund includes 0.78% of government securities.
- Asset Under Management: ₹60,177.2 crore approximately
- Expense Ratio: 0.93%
- Investment Details: Equity (91.91%), Debt (0.78%), Others (7.3%)
- Launch Date: January 2013
- Exit Load: 1%
5. Nippon India Small Cap Fund
Nippon India Small Cap Fund (Direct Growth) invests 93.96% in equities of Indian companies. It includes 7.63% large cap stocks, 11.9% mid cap stocks, and 45.51% small cap stocks. You can compare its performance with Nifty Smallcap 250 TRI before investing.
- Asset Under Management: ₹50,286,29 crore approximately
- Expense Ratio: 0.74%
- Launch Date: September 2010
- Exit Load: 1%
Key Takeaway
The best equity mutual funds in India offer potential high returns, despite market volatility. However, the returns are taxable as per STCG and LTCG rules. Based on your holding period, the rate of tax applies to your returns. Make sure to calculate the tax amount to optimize the returns from your investments in these mutual funds.
Frequently Asked Questions
1. Is equity mutual fund safe?
Equity mutual funds are subject to market risks. As a result, the fund performance might fluctuate with market conditions. However, you can include these funds in your portfolio for potentially high returns if you have a high risk tolerance and ensure diversification.
2. Will equity mutual funds give me a dividend?
Based on the companies in which equity mutual funds invest, certain funds might provide dividends to investors if the underlying conditions declare a dividend payout. Ensure you check the terms and conditions for dividend payout before you invest.
3. How long do I need to stay invested in some of the best equity mutual funds?
As equity mutual funds are subject to market volatility, staying invested for the long term can help you minimise risks. However, if you invest in an open-ended equity fund, you can choose to redeem based on your convenience.
4. What are equity mutual funds?
Equity mutual funds invest in large, small and mid cap stocks. The portfolio of these funds includes equity-oriented instruments that are subject to market volatility.
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