Direct investing in stocks is not for everyone as it involves risks. Yet, equity investments are known to provide attractive, inflation-adjusted returns in the long term. Mutual funds managed by professional fund managers bridge this gap for investors who are risk averse, but don’t want to miss out on lucrative returns. The popular financial instrument enables individuals who lack extensive market knowledge to invest indirectly in a wide range of stocks with a relatively small amount of capital. Viewed from this standpoint, it would be prudent to learn about the best mutual funds in India.
Thanks to their potential for higher returns and the ease of investment through systematic investment plans (SIPs), mutual fund schemes have become immensely popular in India. To make the most out of their investment, investors should pick the best mutual funds in India. One should consider the mutual fund’s historical performance, expertise of the fund manager, and alignment with personal goals before investing. Let’s dig in to learn more.
Best mutual funds in India in 2024 (as per 3-year returns)
Mutual funds are not a homogeneous asset class. They come in all shapes and sizes—equity funds, debt funds, hybrid funds, liquid funds, sectoral funds etc. Thanks to regulatory oversight, mutual funds are considered safe investments. We have curated a list of the best mutual funds in India which you can consider for investment.
| Leading Funds (based on three-year return) | 3Y Return |
| Aditya Birla Sun Life PSU Equity Fund Direct-Growth | 43.05% |
| SBI PSU Direct Plan-Growth | 42.14% |
| ICICI Prudential Infrastructure Direct Growth | 39.99% |
| HDFC Infrastructure Direct Plan-Growth | 36.95% |
| Quant Infrastructure Fund Direct-Growth | 37.03% |
| Aditya Birla Sun Life Medium Term Plan Direct-Growth | 13.46% |
| Bank of India Short-Term Income Fund Direct-Growth | 12.66% |
| UTI Credit Risk Fund Direct-Growth | 11.71% |
| UTI Dynamic Bond Fund Direct-Growth | 11.42% |
| Nippon India Strategic Debt Fund Direct-Growth | 5.62% |
Quant Multi Asset Fund Direct-Growth | 24.76% |
| ICICI Prudential Equity & Debt Fund Direct-Growth | 24.76% |
| HDFC Balanced Advantage Fund Direct Plan-Growth | 39.42% |
| JM Aggressive Hybrid Fund Direct-Growth | 26.53% |
| Bank of India Mid & Small Cap Equity & Debt Fund Direct-Growth | 21.61% |
Overview of the best mutual funds in India in 2024 (as per 3Y returns)
Going by returns over a three-year period, mutual funds in India in 2024 exhibit a range of performance. Sectoral/thematic funds have done very well, though they are categorized as “very high risk” as per SEBI’s Riskometer. Thematic-PSU funds provided robust returns during the review period, though considered risky. Debt funds are preferred for stability in the face of economic swings since they stabilize with modest gains. In general, the best mutual funds for SIP provide a range of options catered to their risk tolerance and financial objectives.
Aditya Birla Sun Life PSU Equity Fund Direct-Growth
The Net Asset Value (NAV) of the Aditya Birla Sun Life PSU Equity Fund – Regular Plan (Growth option) is Rs 39.08, as on July 25, 2024. The fund’s three-year returns came in at 43.05%. The fund, which has a 92.87% investment in equities, has an expense ratio of 0.46%.
SBI PSU Direct Plan-Growth
The fund invests mainly in equity—39.26 % in large-cap organizations, 25.88%, in mid-cap stocks, and 17.91% in small-cap stocks. Its main holdings are Indian Oil Corporation, BHEL, ONGC, NHPC, NTPC, Indian Bank, SBI, Canara Bank and NMDC Limited. The expense ratio of the fund is 0. 78%.
ICICI Prudential Infrastructure Direct Growth
ICICI Prudential Infrastructure Direct-Growth is a sectoral-infrastructure mutual fund scheme. The infrastructure-themed fund returned 39.99% in three years and has an NAV of Rs. 207.27, as on July 25, 2024. The fund predominantly invests in domestic equities—39.93% in large-caps, 10.41% in mid-cap stocks, and 18.59% in small-cap stocks. The scheme has an expense ratio of 1.19%.
HDFC Infrastructure Direct Plan-Growth
HDFC Infrastructure Direct Plan-Growth comes from the storied HDFC fund house. The infrastructure-themed fund, which returned 36.95% in the three-year period, had an NAV of Rs. 53.26 as on July 25, 2024. Rated “Very High Risk” as per Riskometer, the scheme has an expense ratio of 1.18%.
Quant Infrastructure Fund Direct-Growth
Quant Infrastructure Fund Direct-Growth has a three-year return of 37.03% and NAV of Rs. 46.92 as of July 25, 2024. The thematic fund invests 18.01% in large-cap stocks, 23.03% in small-caps, and 19.94 in mid-caps. Some of its major holdings are HDFC Bank, Reliance Industries, Steel Authority of India, and Tata Power.
Aditya Birla Sun Life Medium Term Plan Direct-Growth
Aditya Birla Sun Life Medium Term Plan Direct-Growth, a debt fund, has 89.35% of its investments in debt. Out of this, 44.94% are in government securities, and 40.67% in low-risk securities. The fund, which has three-year returns of 13.46%, has an expense ratio of 0.85%. It is categorized as Moderately High Risk.
Bank of India Short-Term Income Fund Direct-Growth
The Direct-Growth option of the Bank of India Short-Term Income Fund has an expense ratio of 0.50%. The fund has three-year returns of 12.66%. The debt fund invests 91.92% in debt securities, with 37.54% in government securities and 54.38% in low-risk securities.
UTI Credit Risk Fund Direct-Growth
UTI Credit Risk Fund Direct-Growth has an expense ratio of 0.89%. The fund’s three-year returns are 11.71%. The fund has “moderately high” risk and has an NAV of Rs. 17.75 as of July 25, 2024.
UTI Dynamic Bond Fund Direct-Growth
UTI Dynamic Bond Fund Direct-Growth has an NAV of Rs. 30.99 as of July 25, 2024. The bond fund which carries “moderate risk,” returned 11.42% in the three-year period.
Nippon India Strategic Debt Fund Direct-Growth
The debt fund returned 5.62% in the three-year period. The “moderately high” risk fund has an NAV of Rs. 15.40 as of July 25, 2024.
Quant Multi Asset Fund Direct-Growth
Quant Multi Asset Fund Direct-Growth, a hybrid fund, has an expense ratio of 0.67 percent. The “very high” risk category fund returned 24.76% in the three-year period. The fund invests 50.24% in Indian equities and also has a small proportion allocated to debt.
ICICI Prudential Equity & Debt Fund Direct-Growth
The aggressive hybrid fund’s returns for the three-year period is 24.76% and has an expense ratio of 1%. The fund’s NAV is Rs. 406.33, as of July 25, 2024.
HDFC Balanced Advantage Fund Direct Plan-Growth
The HDFC Balanced Advantage Fund Direct Plan-Growth is a hybrid fund investing in both equity and debt. The fund, which has an expense ratio of 0.73%, has returned 39.42% in the three-year period. The fund has allocated 28.80% to debt, while 51.03% has been allotted to equities.
JM Aggressive Hybrid Fund Direct-Growth
JM Aggressive Hybrid Fund Direct-Growth is a hybrid fund where more than 65% of investments are made in equities. The fund, which is categorized as “very high” risk has an expense ratio of 0.60% and has returned 26.53% in three years.
Bank of India Mid & Small Cap Equity & Debt Fund Direct-Growth
The aggressive hybrid fund returned 21.61% in three years. The fund’s expense ratio is 1.16%. The fund invests 79.42% in domestic equities and has a 19.35% investment in debt.
Factors to consider before investing in mutual funds in India
To invest in top mutual funds, one should consider various factors like personal goals, the duration of investment, the historical performance of the fund in question etc.
Be clear about your investment goals
It is advisable to be clear about your investment goals. Your investment goal will dictate your choice of the mutual fund be it equity, debt or a hybrid mutual fund.
Understand your investment duration
The top five mutual funds in India that you select will depend on the likely duration of your investment. Debt funds can be used for short-term funding needs for a time frame of 1 to 3 years, while equity funds would be suited for investments for five years or more.
Check past performance
Often, it will be pertinent to look at the past performance results of the best mutual funds in India to analyze the stability of the fund. The absence of performance trends common across the funds means that good performance in all types of markets can only be inferred from the performance trends emerging from the following analysis.
Evaluate the fund manager’s experience
A large part of a fund’s performance is a function of the fund manager. An experienced fund manager with a commendable performance history would be capable of making decisions that are most suitable for the established investment plans.
Know the net asset value (NAV)
The NAV is calculated as the fund’s market value of assets per share of the fund less its liabilities. However, a high NAV does not necessarily mean that the fund is superior to others.
Consider the expense ratio
The expense ratio entails the management fees and other operating expenses. This is because a lower expense ratio directly translates to higher returns for the investors who choose the best mutual funds in India.
Assess your risk tolerance
The risk tolerance of the investor should correspond to the level of risk of a particular fund. Equity funds generally are relatively high risk but have high returns. On the other hand, debt funds have relatively low risk but could have low returns.
Understand exit loads
It is mostly a kind of load that is incurred when you redeem your mutual fund units before a certain time. However, these fees can reduce your profit and you must take note of the exit load structure. It is even better to select top mutual funds that either charge no exit load or a very minimal load to maximize your investment returns.
Conclusion
Mutual funds in India provide a wide range of investment options to suit different risk profiles and financial objectives. By subscribing to mutual funds, you get access to professionally managed portfolios of debt, equity, and hybrid assets. Finding the best mutual funds in India that fit certain financial strategies requires investigating top performers and understanding the fund goals.
