November 09, 2025

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SPREADING YOUR BETS

AS MARKET LEADERSHIP FRAGMENTS AND RETURNS TURN UNEVEN, ATTENTION IS SHIFTING BACK TO DIVERSIFIED EQUITY FUNDS, WHICH BALANCE GROWTH WITH STABILITY BY RIDDHIMA BHATNAGAR india's equity market is entering a phase where returns are no longer uniform and leadership is becoming more dispersed. The result is that investors are rediscovering the charm of diversified equity funds, including flexi-cap, multi-cap, and large & mid-cap schemes, which blend growth potential with risk control. There is now a shift from chasing "top-performing" categories to seeking risk-adjusted, consistent returns. According to Value Research data as of October 15, over the past year, about 46% of flexi-cap funds in the diversified equity category outperformed their benchmarks. In comparison, around 37% of multi-cap funds and 47% of large & mid-cap funds delivered returns higher than their benchmarks "Selective, bottom-up stock picking and concentrated bets in quality companies will matter more. In this environment, diversified funds can do well because they can pick winners across caps and sectors," says Chandraprakash Padiyar, Senior Fund Manager, Tata MFFor much of the post-pandemic period, investors poured money into high-beta categories, small- and mid-cap funds, thematic plays, and even new-age sectors funds such as manufacturing and public sector undertaking (PSU). But as those rallies stretched valuations, the focus began to shift toward stability"Earlier, , defence, and small caps were outperforming by a mile. But not anymore. Investors have noticed that the dispersion of returns is wide and FLEXI-CAP FUNDS ALLOW MANAGERS TO FREELY SHIFT BETWEEN LARGE, MID, AND SMALL-CAP SEGMENTS DEPENDING ON VALUATIONS DIVERSIFIED FUNDS SIMPLIFY ASSET ALLOCATION FOR INVESTORS WHO STRUGGLE TO DECIDE OVER THE PAST ONE YEAR, AMONG DIVERSIFIED EQUITY FUNDS, AROUND 46% FLEXI-CAP FUNDS HAVE BEATEN THE BENCHMARK, FOLLOWED BY 37% MULTI-CAP FUNDS

HOW WE ZEROED IN ON THE FUNDS

Universe and sources: Securities and Exchange Board of India (Sebi)-defined mutual fund categories were evaluated and funds were compared within the same category. The universe includes all currently active open-ended schemes with a minimum three-year history (one-two years for debt funds). Net Asset Value (NAV), expense and portfolio data are from the Association of Mutual Funds in India (AMFI), scheme disclosures, Sebi filings, and asset management companies' (AMCs') factsheets. All returns are based on Direct Plan­Growth NAVs to standardise costs. Data cut-off: September 30, 2025 for performance and August 31, 2025 for portfolio data. Evaluation criteria: Rolling returns were taken (not point-to-point) to capture behaviour across market cycles. Returns are post-fee (embedded in NAV), pre-tax from an investor perspective. Equity and hybrid funds: Monthly rolling returns over three-year and five-year windows. Debt funds: Weekly rolling returns over one-and-a half-year and three-year windows. Index funds tracking Sensex, Nifty 50 or Nifty Next 50 indices, with a minimum history of one-year are consideredSCORING PILLARS Performance & consistency -- Fund return vs category peers, and persistence across cycles. Risk and drawdown --Volatility, absolute losses and underperformance over a risk-free guaranteed investment. Costs and capacity -- Expense ratio percentile, and assets under management (AUM) screens to measure stability/impact. Team and process -- Manager tenure & stability, and governance flagsQuality controls: We apply survivorship screens, exclude strategy/share-class duplicates, cap outlier influence, and run manual audits on any score. Disclosure and independence: No AMC paid for inclusion or ranking; no previews were shared. Rankings were an education tool, not recommendations. Investors should align choices with goals, asset allocation, risk capacity, and taxesMETHODOLOGY FOR TOP FUND MANAGERS Universe: Fund managers across actively managed schemes were evaluated. The universe includes managers of all currently active open-ended equity & debt schemes except liquid, overnight, ultra short duration, low duration and money marketEligibility: Fund managers with minimum fund management tenure of three years in the respective asset class were considered, subject to meeting the following AUM threshold: EQUITY: `5,000 CRORE DEBT: `2,500 CRORE Evaluation criteria: Rolling returns over two time periods were evaluated to capture behaviours across market cycles--one-and-a-half-year and three-year. Returns are post-fee (embedded in NAV), pre-tax from an investor perspectiveDisclosure and independence: No AMC paid for inclusion or ranking; no previews were sharedDATA DEFINITIONS FOR SCORECARD Value Research Fund Rating: Value Research fund rating is based on risk-adjusted performance. The rating of a fund vis-à-vis other funds in its category was determined by its Composite Score (derived after subtracting a fund's Risk Score from its Return Score)For equity and hybrid funds, the Composite Score for 36 months (40% weight) and 60 months (60% weight) were combined to arrive at the Final Score. For debt funds, the Final Score was usually based on 18 months (40%) and 36 months (60%).