equity funds do not have a fixed return. the potential varies by category, time horizon, and market cycle.
over long periods, equity funds have delivered strong returns. a ₹1 lakh investment in uti large cap fund in 1986 grew to roughly ₹2.71 crore over 39 years . the fund delivered a 15.35% cagr since inception .
but returns are not smooth. they fluctuate across years and categories.
returns by category. historical averages
different categories have delivered different returns over time.
over the last 10 years (sip returns). quant small cap fund tops the list with an annualised sip return of 26.05%. nippon india small cap fund follows at 22.59%. invesco india mid cap fund delivered 22.32% . four small-cap funds and four mid-cap funds feature in the top 10 .
the 10-year data shows a clear pattern. small-cap and mid-cap funds have dominated the return charts. invesco, quant and nippon india have consistently produced top-performing funds across multiple time horizons .
over the last 5 years. invesco india mid cap fund leads with a 23.69% sip return. bandhan small cap fund follows at 23.49%. iti small cap fund at 23.06% .
over the last 3 years. invesco india mid cap fund leads at 21.45%. sbi children’s fund at 20.69%. hsbc midcap fund at 19.97% .
over the last 1 year. global funds led the one-year performance at 24.23%. mid-cap funds delivered average returns of 10.08% across 55 schemes. multi-cap funds returned 9.22% .
the 2025 calendar year saw volatility. only three equity categories delivered positive returns: banking funds (4.83%), large-cap funds (0.43%), and international funds (0.17%) . small-cap funds fell roughly 4.68% in 2025 .
what the numbers mean for investors
higher potential returns come with higher risk. small-cap funds have been among the biggest wealth creators over 10 years. they have also been among the most volatile categories .
over the past year, small-cap funds underperformed. they delivered the lowest average rolling return of 5.60% across 45 schemes in fy26. the nifty smallcap 250 index delivered a negative return of -1.11% in fy26 .
trideep bhattacharya of edelweiss asset management noted that small-cap underperformance largely reflects valuation fatigue after two years of outsized gains, along with a shift toward earnings resilience amid volatile macroeconomic conditions .
category returns vary sharply by time period. a fund that tops the 3-year chart may not lead over 10 years.
the role of time in returns
the recent market correction has tested investor patience. sips started in mid-2024 have delivered negative returns in several categories .
over 10 years, every large-cap and flexi-cap scheme has delivered positive returns . none of the schemes in these categories have generated negative 10-year returns.
the uti large cap fund, india’s oldest equity mutual fund, has delivered a 15.35% cagr since 1986 . it is a reminder that time and compounding remain the biggest allies of equity investors.
frequently asked questions
1. what is the average return of equity funds over 10 years?
top performers have delivered 20-26% annualised sip returns over 10 years. category averages are lower. large-cap funds have delivered around 12-15% over similar periods.
2. which equity fund category has the highest return potential?
small-cap and mid-cap funds have the highest return potential over long periods. quant small cap fund delivered 26.05% sip return over 10 years. small-cap funds also carry the highest risk.
3. do equity funds always give positive returns?
no. equity funds can deliver negative returns in the short to medium term. over 10 years, most equity categories have delivered positive returns. sips started in 2024 have delivered negative returns in several categories.
4. why are small-cap returns higher than large-cap returns?
small-cap companies are at an earlier stage of growth. they have higher growth potential but also higher risk. large-cap companies are more stable but grow slower.
5. what is a realistic return expectation for equity funds?
historical data suggests 12-15% for large-cap funds and 15-20% for mid and small-cap funds over long periods. 10-year returns above 20% are exceptional and may not be repeated.
