Top equity mutual funds in India to invest in 2025

It is time for a closer look at the top mutual funds for investment across categories based on factors like volatility, expense ratios, total returns since inception, and more. Also Read: Top 10 index funds in India by AUM

Note that-

1. The expense ratio stands for the annual maintenance charge a mutual fund uses to finance miscellaneous expenses like management fees, allocation charges, costs of advertising, and more.
2. Volatility refers to the degree of variation in the price of a mutual fund over time. Standard deviation gauges the dispersion of returns from the mean, offering insights into the fund's historical price fluctuations. Beta, on the other hand, compares the fund's volatility to the overall market's.
3. Total returns since inception offer investors a long-term perspective on how well the fund has performed over its entire existence.
4. The Portfolio Turnover Ratio (PTR) measures the frequency with which the fund's holdings are bought and sold within a specific period. A higher turnover ratio indicates more frequent trading, potentially leading to increased transaction costs and capital gains taxes for investors. On the other hand, a lower turnover ratio implies a buy-and-hold strategy with fewer portfolio adjustments.
5. Tracking error quantifies the variability between a mutual fund's performance and the performance of its benchmark index. A low tracking error suggests the fund closely mirrors the benchmark, while a higher tracking error indicates greater deviation.

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CRISIL Mutual Fund Ranking Methodology

According to the rating agency, a subsidiary of S&P Global, mutual funds are divided into three peer groups--equity, debt, and hybrid. To be included in the ranking, these funds must have a 'three-year or one-year NAV history and AUM in excess of category cut-off limits and complete portfolio disclosures.' And they only consider open-ended schemes. The methodology document states a three-year NAV history is considered across all equity, hybrid, dynamic bond, medium duration, medium to long duration, banking & PSU, corporate bond, credit risk and gilt categories, whereas one-year for liquid, low duration, money market, ultra-short term categories.

Eligibility criteria

• Only open-ended funds are considered; both regular and direct plans are ranked separately
• NAV history
  − Three years for equity, hybrid, gilt, dynamic, medium to long, medium duration, banking & PSU, corporate bond, credit risk and short-duration funds
  − One year for arbitrage, low duration, ultra-short, money market and liquid funds
• AUM cut-off criteria:
  For equity funds - Rs10 crore
  For debt and hybrid - Rs50 crore
  For debt fund less than a year - Rs250 crore
  For liquid funds - Rs1000 crore
• Complete portfolio disclosure for all three months in the last quarter
• For debt funds, fortnightly portfolios are also considered.

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Funds excluded from rankings

Based on SEBI guidelines, CRISIL excludes the following funds from rankings.

• Equity: Dividend yield funds, sectoral/thematic funds
• Debt: Overnight funds, long duration funds, 10-year constant maturity gilt funds, floater funds
• Hybrid: Dynamic asset allocation/balanced advantage funds, multi-asset allocation funds, equity savings funds
• Others: Solution-oriented funds, fund of funds, index/ETFs (other than ones replicating Nifty or Sensex)

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How to choose the best mutual fund

Investment experts always urge investors to park their money based on what they want to achieve with it. Mutual funds are not an exception to this general rule of thumb. Two fundamental questions to answer before investing in mutual funds are:

1. What is the duration of your investment?
2. How much risk are you willing to take?

Once you have your answers, look for the following attributes:

1. Consistency - A fund that consistently performs is a good choice. For example, if the return for a fund is 10 percent in the first year, 12 percent in the next, and 12.5 percent after that, it will be preferred over a fund that gives 32 percent in year one, -13 percent in the next, and maybe 2 percent in the next. Consistency can always be trusted over risky behaviour.

2. Good fit - While selecting the plan, also figure out how it fits with your overall investments, how it will impact your liquidity and tax efficiency, and how it will help you with returns.

3. Who is managing - A consistent fund management team is an advantage when you are investing in a mutual fund. Continuity plays a crucial role in a fund's long-term performance, so try to avoid funds that see a lot of churn in top management.

4. Past performance - Pay attention to how the mutual fund has performed. History is no guarantee of the future, but it gives you an idea of how the funds were handled in most market situations in the past. If they outperformed the market situation, you might consider such funds.

5. Downside protection - Assume a fund gives 20 percent in returns in the first year and the second year performance drops to, say, -35 percent. This means that the fund did not have downside protection against the drastic performance. Funds like these are not suitable for investment if you are risk-averse.