Top Return Mutual Funds in India

Mutual funds have long been a favored investment option for individuals looking to diversify their portfolios, achieve financial goals, and benefit from market growth without directly buying stocks or bonds. In India, mutual funds have seen a rapid surge in popularity, driven by increasing investor awareness, ease of access, and favorable market conditions. The key question on every investor’s mind is: Which are the top-return mutual funds? In this blog, we will take a detailed look at some of the best-performing mutual funds in India in 2024, their categories, and how they align with different investor goals.

1. Understanding Mutual Fund Categories

Before diving into the top return mutual funds, it’s essential to understand the various types of mutual funds based on asset allocation and investment strategies. Mutual funds can be broadly categorized into:

• Equity Mutual Funds: Invest primarily in stocks or shares of companies.
• Debt Mutual Funds: Invest in fixed-income instruments like bonds, government securities, etc.
• Hybrid Mutual Funds: A combination of both equity and debt.
• Index Funds: Track a particular index, such as Nifty 50 or Sensex.
• ELSS (Equity Linked Savings Scheme): Provide tax benefits under Section 80C of the Income Tax Act.

Each of these fund categories serves different investment objectives, such as wealth creation, stable income, tax-saving, or capital preservation.

2. Factors to Consider When Choosing a Mutual Fund

Choosing a mutual fund involves evaluating several factors to ensure it aligns with your financial goals, risk tolerance, and investment horizon. Here are some of the critical factors you should assess:

• Historical Performance: Review the fund’s past performance, particularly its returns over 1, 3, and 5 years.
• Fund Manager’s Expertise: A fund’s success largely depends on the expertise of its fund manager and their ability to navigate market conditions.
• Expense Ratio: This is the annual fee charged by the fund to manage your investments. A lower expense ratio translates into higher returns for investors.
• Risk Profile: Different mutual funds come with varying degrees of risk. Equity funds generally carry higher risk, while debt funds are more stable.
• AUM (Assets Under Management): Funds with a larger AUM tend to be more stable and better managed.

Now, let’s explore the top return mutual funds in India in 2024, categorized by their respective asset classes.

3. Top Performing Equity Mutual Funds

Equity mutual funds are designed for investors who seek high returns by investing in the stock market. They are ideal for individuals with a high-risk tolerance and a long-term investment horizon. Here are some of the top-performing equity mutual funds in India:

a) Mirae Asset Large Cap Fund (Direct Growth)

• Fund Overview: This fund primarily invests in large-cap companies with a strong market presence.
• 1-Year Returns: 24.5%
• 3-Year Returns: 17.8%
• 5-Year Returns: 14.2%
• Why Invest: Mirae Asset Large Cap Fund has consistently delivered strong returns over the years, benefiting from stable, large-cap companies that offer sustainable growth. It’s a great option for long-term wealth accumulation with moderate risk.

b) Axis Midcap Fund (Direct Growth)

• Fund Overview: Axis Midcap Fund focuses on mid-cap stocks, which have high growth potential but come with slightly higher risk.
• 1-Year Returns: 26.1%
• 3-Year Returns: 22.9%
• 5-Year Returns: 17.4%
• Why Invest: For investors looking to tap into mid-sized companies with growth potential, this fund offers attractive returns. The risk is higher than large-cap funds, but the reward potential is significant for long-term investors.

c) SBI Small Cap Fund (Direct Growth)

• Fund Overview: This small-cap fund focuses on companies with a market capitalization of less than ₹500 crore.
• 1-Year Returns: 38.5%
• 3-Year Returns: 24.2%
• 5-Year Returns: 19.8%
• Why Invest: The fund has a strong track record of identifying high-potential small-cap stocks that have outperformed during bull markets. However, it carries higher volatility, making it suitable for aggressive investors with a long-term outlook.

4. Top Performing Debt Mutual Funds

Debt mutual funds are favored by conservative investors who seek stability and regular income. These funds invest in fixed-income instruments such as bonds, treasury bills, and government securities.

a) ICICI Prudential Corporate Bond Fund (Direct Growth)

• Fund Overview: This fund invests in high-rated corporate bonds, offering a balance of security and returns.
• 1-Year Returns: 7.4%
• 3-Year Returns: 8.2%
• 5-Year Returns: 7.8%
• Why Invest: ICICI Prudential Corporate Bond Fund is ideal for investors looking for stability with decent returns. It’s an excellent choice for short to medium-term financial goals.

b) HDFC Short Term Debt Fund (Direct Growth)

• Fund Overview: This short-term debt fund is a low-risk option that invests in debt instruments with shorter maturities.
• 1-Year Returns: 6.8%
• 3-Year Returns: 7.1%
• 5-Year Returns: 6.9%
• Why Invest: This fund suits investors seeking stable returns over a short-term horizon, such as 1-3 years, while preserving capital.

5. Top Performing Hybrid Mutual Funds

Hybrid funds combine both equity and debt, offering a balanced approach to risk and return. These funds are suitable for investors looking for a mix of growth and income.

a) ICICI Prudential Equity & Debt Fund (Direct Growth)

• Fund Overview: This hybrid fund allocates its assets between equity and debt instruments, providing a balance of growth and stability.
• 1-Year Returns: 15.7%
• 3-Year Returns: 14.2%
• 5-Year Returns: 13.4%
• Why Invest: The ICICI Prudential Equity & Debt Fund has a well-diversified portfolio, making it an excellent option for investors who want moderate risk with consistent returns over the medium to long term.

b) HDFC Balanced Advantage Fund (Direct Growth)

• Fund Overview: This is a dynamic asset allocation fund that adjusts its equity and debt exposure based on market conditions.
• 1-Year Returns: 13.2%
• 3-Year Returns: 11.5%
• 5-Year Returns: 10.9%
• Why Invest: HDFC Balanced Advantage Fund provides the flexibility of switching between equity and debt depending on market volatility, making it an attractive choice for investors who prefer active risk management.

6. Top Performing ELSS Funds (Tax-Saving Mutual Funds)

Equity Linked Savings Schemes (ELSS) offer tax benefits under Section 80C of the Income Tax Act. These funds are ideal for individuals looking to save on taxes while building wealth over the long term.

a) Axis Long Term Equity Fund (Direct Growth)

• Fund Overview: This ELSS fund primarily invests in high-growth equity securities.
• 1-Year Returns: 17.9%
• 3-Year Returns: 15.3%
• 5-Year Returns: 12.8%
• Why Invest: Axis Long Term Equity Fund has consistently been one of the top-performing ELSS funds. It’s a perfect choice for investors seeking tax savings along with long-term wealth creation.

b) Mirae Asset Tax Saver Fund (Direct Growth)

• Fund Overview: This fund invests in a diversified portfolio of equity instruments across various sectors.
• 1-Year Returns: 18.4%
• 3-Year Returns: 16.2%
• 5-Year Returns: 13.7%
• Why Invest: With its strong focus on equity, this ELSS fund offers excellent potential for long-term capital appreciation, alongside the added benefit of tax savings.

7. Key Takeaways for Mutual Fund Investors

1. Identify Your Goals: Are you looking for long-term wealth creation, regular income, or tax savings? Your financial goals should drive your mutual fund choices.
2. Assess Your Risk Appetite: Equity funds carry higher risk but offer higher returns, while debt funds are stable but provide moderate returns. Hybrid funds balance both.
3. Diversify Your Portfolio: A mix of equity, debt, and hybrid funds can help mitigate risk and ensure steady growth.
4. Stay Invested for the Long-Term: Equity funds, especially, tend to perform better over extended periods. The power of compounding works best when you stay invested for the long haul.
5. Monitor Fund Performance Regularly: Although mutual funds are meant for long-term investment, it’s essential to track performance and make adjustments if necessary.

Conclusion

The Indian mutual fund market offers a wide array of funds suited for different financial goals and risk profiles. As of 2024, funds like Mirae Asset Large Cap, Axis Midcap, and ICICI Prudential Corporate Bond Fund have proven to deliver strong returns, catering to investors with varying preferences. Before making any investment decision, consider your objectives, risk tolerance, and consult a certified mutual fund advisor if necessary.

By selecting the right mutual fund, you can build a robust portfolio that generates returns, helps save on taxes, and supports your financial growth over time. Keep in mind that mutual fund investments are subject to market risks, so thorough research and regular monitoring are key to maximizing returns.