Best Mutual Funds in India — How to Compare and Choose the Top Performing Funds

Types of Mutual Funds in India

Before you compare, understand how funds are categorised —

Best Performing Mutual Funds in India (By 3-Year Annualised Returns)

Here are some of the good mutual funds to invest in India, categorised by fund type and historical return potential —

Funds	1-Year Return  (%)	3-Year Return (%)	5-Year Return (%)
Motilal Oswal BSE Enhanced Value Index Fund	20.9	32.01	36.8
ICICI Prudential Transportation & Logistics Fund	17.6	30.11	28.7
Nippon India Multi Asset Allocation Fund Direct – Growth	20.7	22.83	18.2
UTI Multi Asset Allocation Fund – Direct Growth	11.44	21.17	16.07
HDFC Income Plus Arbitrage Active FOF – Growth	1.11	12.75	13.35
Aditya Birla Sun Life Credit Risk Fund – Direct Growth	18.17	11.64	10.76
Edelweiss Gold & Silver FoF	114.22	41.56	-
ICICI Prudential Equity & Debt Fund Direct – Growth	12.75	19.76	22.39
Franklin India Opportunities Fund – Growth	3.36	31.44	22.15
Axis Silver FoF	158.33	47.99	-

Below are the best mutual funds in different categories —

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Top Equity Mutual Funds

These are often the best mutual funds in India for long-term goals due to higher growth potential —

Fund	Category	3Y Returns*	Minimum Investment
Motilal Oswal BSE Enhanced Value Index Fund	Value Oriented	32.01%	₹101
Bandhan Small Cap Fund – Direct Growth	Small Cap	31.44%	₹100
Franklin India Opportunities Fund – Growth	Themed	31.44%	₹101
ICICI Prudential Transportation & Logistics Fund	Themed	30.11%	₹100

These funds cover different themes, international technology, value, small caps, and sector focus, which diversify your exposure.

Best Hybrid Mutual Funds

Hybrid mutual funds in India are a blend of equity and debt. These funds offer moderate risk and decent returns —

Fund	Category	3Y Returns*	Minimum Investment
Quant Multi Asset Fund Direct – Growth	Multi Asset	23.19%	₹1,000
Nippon India Multi Asset Allocation Fund Direct – Growth	Multi Asset	22.38%	₹100
UTI Multi Asset Allocation Fund – Direct Growth	Multi Asset	21.17%	₹500
ICICI Prudential Equity & Debt Fund Direct – Growth	Aggressive Hybrid	19.76%	₹100

Hybrid funds help reduce volatility while providing growth potential.

Best Debt Mutual Funds

These mutual funds in India are suitable for stability and short-term or conservative goals —

Fund	Category	3Y Returns*	Minimum Investment
HDFC Income Plus Arbitrage Active FOF – Growth	Others	12.75%	₹100
Aditya Birla Sun Life Credit Risk Fund – Direct Growth	Credit Risk	11.64%	₹100

Debt funds offer lower returns than equity but smoother performance.

Top Commodity Mutual Funds 

You can use commodity funds (like gold and silver ETFs) for inflation protection —

Fund Name	Category	3Y Returns*
HDFC Silver ETF FoF	Silver	48.25%
Axis Silver FoF	Silver	47.99%
Edelweiss Gold & Silver FoF	Gold	41.56%

*As of 6 January, 2026

How to Compare Mutual Funds in India?

Here are some criteria to compare mutual funds in India and find the best ones —

1️⃣ Alignment with Investment Objectives

If your goal is long-term wealth creation, equity mutual funds or flexi-cap funds generally work better than debt funds.

➡ Matching the fund category with your objective is the first step.

2️⃣ Fund Performance Across Market Cycles

The best performing mutual funds in India are not the ones that shine for just 1 year, but those that stay consistent across ups and downs.

• Prefer funds with 5+ years history
• Check performance vs benchmark
• Compare rolling returns, not just point-to-point returns

Example: Fund A gave 30% last year but only 6% over 5 years. Fund B, meanwhile, gave 15% consistently over 5 years. In this case, Fund B may actually be a better long-term performer.

3️⃣ Compare Expense Ratio

A lower expense ratio means higher take-home returns for you. For instance, if two funds generate 13% returns —

• Fund A expense: 2%
• Fund B expense: 1%

Your effective return is:

• Fund A → 11%
• Fund B → 12%

Over 10 years, that 1% difference compounds big-time.

4️⃣ Check the Fund Manager’s Track Record

The experience and skill of a fund manager matter greatly. A seasoned manager with a good track record through different market conditions enhances the chance of outperforming peers. Look for —

• Fund manager’s tenure
• Other funds managed by the same manager
• Performance consistency

If a manager consistently beats benchmarks, it signals better execution.

5️⃣ Evaluate Risk Using Financial Ratios

➡ High Sharpe + High Alpha + Moderate Beta = stronger historical stability

6️⃣ Don’t Chase Only Past Returns

Past returns help in comparison. However, future returns depend on market conditions, fund strategy, and asset allocation.

Pro Tip: Instead of asking “Which is the best mutual fund right now?”, ask, “Which mutual fund suits my goal and risk-return profile?”

Taxation on Mutual Fund Returns in India

Understanding how mutual funds in India are taxed helps in net return calculations.

Capital Gains Tax

• Equity Funds
  • Short-term gains (held < 1 year): Taxed at 20%
  • Long-term gains (held ≥ 1 year): Taxed at 12.5% on gains above ₹1.25 lakh
     
• Debt Funds
  • Held < 3 years: Taxed at your income tax slab
  • Held ≥ 3 years: Taxed at 20% with indexation

Dividend Tax

Dividend income from mutual funds is added to your total taxable income and taxed as per your slab. TDS may apply if dividend income exceeds ₹5,000 in a year.

Why is it Important to Choose the Right Mutual Funds in India?

A mutual fund that worked for someone else may not always be the right choice for you. For example —

In simple terms, even if you pick a good fund, it can be a disaster if it doesn’t align with your goal. For instance, if you want liquidity but invest in a long-term plan with a lock-in, you won’t achieve the returns or access funds as per your goal.