An equity mutual fund is one which invests solely in stocks of various companies. The aim of equity funds is to provide capital appreciation over the medium to long-term. Such schemes invest in a major part of their corpus in equities. This is why if you are looking to benefit from th growing economy of India, you should look at the best equity funds listed below.

These schemes provide different options to investors like dividend option, capital appreciation, etc., and the investors can choose an option depending on their preferences. Sometimes these funds may invest privately when the investment is made in private companies which are not traded publicly. It is referred to as private equity.

Most equity mutual funds provide you with the option to redeem your investment at any time. Such funds are called open-ended funds. Exception – ELSS funds which have a lock-in period of three years. The capital gains from equity mutual funds are exempt from tax if the period of investment is longer than one year. However, these funds are highly volatile in nature. Although it could be a high-risk investment in the short term, investors can expect capital appreciation in the long run.

Types of Equity Mutual Funds

1. Large Cap Mutual Funds

These invest primarily in large companies and therefore are a safer investment in comparison to others. Such companies have a capital worth ₹20,000 crores or more. Large companies are more stable and therefore more trusted compared to all other businesses in the market and the funds that invest in these companies tend to provide stable returns. Such funds are suitable for investors who have a low-risk appetite and want stable returns.

2. Mid Cap Mutual Funds

These funds make investments in middle size companies. They are considered to be riskier than large-cap funds. However, these funds also provide the opportunity to grow very fast. Mid-cap funds are suitable for investors who are willing to take risk. However, they should take into consideration the fact that mid cap funds are highly volatile and could become a reason for loss if invested for a shorter period.

3. Small Cap Mutual Funds

These funds invest in companies that are very small but have a potential for growth. Small-cap funds are considered to be riskier than large and mid cap mutual funds as there is a high chance of such companies not being able to manage their operations properly. However, sometimes new and innovative ideas work out and turn into successful companies.

4. Sector Mutual Funds

Sector mutual funds invest in companies in a particular area or theme like banking, PSU, infra, rural, etc. Hence, these funds are riskier than the well diversified ones. These are more volatile due to holdings in one particular sector. Sector funds are best when there are high chances that a particular industry is going to get great gains in the coming times. For instance, the infrastructure sector is performing well on the market these days and hence providing good returns to the investors of infrastructure sector funds.

5. Multi Cap Mutual Funds

Multi-cap funds are a type of mutual funds that are commonly known for investing across different segments of companies categorized into small, mid, and large caps. Equity Multi Cap funds are also known as diversified funds and are suitable for first time investors as they prefer to get good returns with average risk. Equity Multi Cap funds are relatively less risky compared to a pure mid cap or small cap funds as the risk is distributed well over the market.

6. Index Mutual Funds

Index funds are investment funds that are created to replicate the performance of market benchmark or index. Index funds behave like a market index tracker and invest in the same ratio as a particular index such as Nifty, Sensex, etc. These funds provide lower turnover along with a lower expense ratio. Therefore, index mutual funds are suitable for investors who are looking for a safe side of investment which mimics the returns of the market index. These funds are not meant to beat the market but achieve the same gains as the market.

 

Best Equity Funds to Invest in 2017

Best Large-cap Funds

Mirae Asset India Opportunities Fund

Mirae Asset India Opportunities Fund was launched in April 2008 and holds a total of 58 securities. Some of its top holdings are HDFC Bank Ltd., ICICI Bank Ltd., Maruti Suzuki India Ltd., etc.

Risk Level Moderately Low
Minimum SIP Amount ₹1000
1 Year Returns 30.02%
3 Year Returns 16.07%
5 Year Returns 21.64%

Reliance Top 200 Fund

Reliance Top 200 Fund was launched in August 2007 and holds a total of 51 securities. Some of its top holdings are ITC Ltd., State Bank of India, Infosys Ltd., etc.

Risk Level Moderately Low
Minimum SIP Amount ₹500
1 Year Returns 29.71%
3 Year Returns 13.07%
5 Year Returns 18.79%

Quantum Long Term Equity Fund Growth

Quantum Long Term Equity Fund Growth was launched in March 2006 and holds a total of 25 securities. Some of its top holdings are Bajaj Auto Ltd., Hero MotoCorp Ltd., Infosys Ltd., etc.

Risk Level Moderately High
Minimum SIP Amount ₹500
1 Year Returns 19.36%
3 Year Returns 12.35%
5 Year Returns 17.32%

Best Mid-cap Funds

Aditya Birla Sun Life Small & Mid Cap Fund

Aditya Birla Sun Life Small & Mid Cap Fund was launched in May 2007 and holds a total of 51 securities. Some of its top holdings are Chennai Petroleum Corporation Ltd., Dewan Housing Finance Corporation Ltd., Natco Pharma Ltd., etc.

Risk Level High
Minimum SIP Amount ₹1000
1 Year Returns 36.14%
3 Year Returns 25.79%
5 Year Returns 27.88%

L&T Midcap Fund

L&T Mid Cap Fund was launched in August 2004 and holds a total of 79 securities. Some of its top holdings are IndusInd Bank Ltd., Graphite India Ltd., Shree Cement Ltd., etc.

Risk Level High
Minimum SIP Amount ₹500
1 Year Returns 39.45%
3 Year Returns 23.93%
5 Year Returns 29.42%

Aditya Birla Sun Life Pure Value Fund

Aditya Birla Sun Life Pure Value Fund was launched in March 2008 and holds a total of 45 securities. Some of its top holdings are Hindustan Petroleum Corporation Ltd., ICICI Bank Ltd., UPL Ltd., etc.

Risk Level High
Minimum SIP Amount ₹1000
1 Year Returns 40.65%
3 Year Returns 22.19%
5 Year Returns 30.42%

Best Small-cap Funds

Kotak Emerging Equity Scheme

Kotak Emerging Equity Scheme was launched in March 2007 and holds a total of 68 securities. Some of its top holdings are CBLO(CCIL)., IndusInd Bank Ltd. (91D), Schaeffler India Ltd., etc.

Risk Level High
Minimum SIP Amount ₹1000
1 Year Returns 25.53%
3 Year Returns 20.70%
5 Year Returns 25.65%

Reliance Small Cap Fund

Reliance Small Cap Fund was launched in Sept 2010 and holds a total of 94 securities. Some of its top holdings are Navin Fluorine International Ltd., Aditya Birla Finance Ltd. (91D), Vindhya Telelinks Ltd., etc.

Risk Level High
Minimum SIP Amount ₹100
1 Year Returns 39.40%
3 Year Returns 23.38%
5 Year Returns 32.31%

L&T Emerging Business Fund

L&T Emerging Business Fund was launched in May 2014 and holds a total of 70 securities. Some of its top holdings are Max Financial Services Ltd., Lakshmi Machine Works Ltd, Rane Holdings Ltd., etc.

Risk Level High
Minimum SIP Amount ₹500
1 Year Returns 46.25%
3 Year Returns 26.98%
5 Year Returns N/A

Best Sector Funds

Sundaram Rural India Fund

Sundaram Rural India Fund was launched in May 2006 and holds a total of 63 securities. Some of its top holdings are Hindustan Unilever Ltd., Mahindra & Mahindra Ltd., ITC Ltd., etc.

Risk Level Moderately High
Minimum SIP Amount N/A
1 Year Returns 25.19%
3 Year Returns 21.76%
5 Year Returns 21.74%

Franklin Build India Fund

Franklin Build India Fund was launched in Sept 2009 and holds a total of 35 securities. Some of its top holdings are State Bank of India. HDFC Bank Ltd., ICICI Bank Ltd., etc.

Risk Level High
Minimum SIP Amount ₹500
1 Year Returns 32.35%
3 Year Returns 19.04%
5 Year Returns 27.72%

DSP BlackRock Natural Resources & New Energy Fund

DSP BlackRock Natural Resources & New Energy Fund was launched in April 2008 and holds a total of 20 securities. Some of its top holdings are CBLO(CCIL), Gail(India) Ltd., Coal India Ltd. etc.

Risk Level High
Minimum SIP Amount ₹500
1 Year Returns 46.00%
3 Year Returns 25.79%
5 Year Returns 23.51%

Best Multi-Cap Funds

Aditya Birla Sun Life Advantage Fund

Aditya Birla Sun Life Advantage Fund was launched in Feb 1995 and holds a total of 61 securities. Some of its top holdings are HDFC Bank Ltd., Yes Bank Ltd., Maruti Suzuki India Ltd. Etc.

Risk Level High
Minimum SIP Amount ₹1000
1 Year Returns 27.31%
3 Year Returns 19.45%
5 Year Returns 23.84%

Franklin India High Growth Companies Fund

Franklin India High Growth Companies was launched in July 2007 and holds a total of 38 securities. Some of its top holdings are HDFC Bank Ltd., State Bank of India, ICICI Bank Ltd., etc.

Risk Level Moderately High
Minimum SIP Amount ₹500
1 Year Returns 28.06%
3 Year Returns 15.64%
5 Year Returns 24.43%


JM Multi Strategy Fund

JM Multi Strategy Fund was launched in Sept 2008 and holds a total of 34 securities. Some of its top holdings are Bajaj Finance Ltd., HDFC Bank Ltd., Maruti Suzuki India Ltd., etc.

Risk Level High
Minimum SIP Amount N/A
1 Year Returns 29.92%
3 Year Returns 14.93%
5 Year Returns 19.57%

Best Index Funds

HDFC Index Fund

HDFC Index Fund was launched in July 2002 and holds a total of 52 securities. Some of its top holdings are HDFC Bank Ltd., Reliance Industries Ltd., ITC Ltd., etc.

Risk Level Moderately High
Minimum SIP Amount ₹1000
1 Year Returns 25.38%
3 Year Returns 8.51%
5 Year Returns 13.93%

UTI Nifty Fund

UTI Nifty Fund was launched in Feb 2000 and holds a total of 58 securities. Some of its top holdings are HDFC Bank Ltd., Reliance Industries Ltd., ITC Ltd., etc.

Risk Level Moderately High
Minimum SIP Amount ₹500
1 Year Returns 24.27%
3 Year Returns 8.72%
5 Year Returns 13.40%


ICICI Prudential Nifty Index Fund

ICICI Prudential Nifty Index fund was launched in Feb 2002 and holds a total of 52 securities. Some of its top holdings are HDFC Bank Ltd., Reliance Industries Ltd., ITC Ltd., etc.

Risk Level Moderately High
Minimum SIP Amount ₹1000
1 Year Returns 23.51%
3 Year Returns 8.22%
5 Year Returns 13.43%

Tax on Equity Mutual Funds

There is a lot of misconception about the tax on equity mutual funds. The tax rates applicable on equity mutual funds are not the same as tax applicable on your regular income. .

 

Short Term Gain: This is for when investments are sold or redeemed before a year from the date of investment. Gains made from such investments are taxed at a flat 15%.

Long Term Gain:  If the time duration between the date of investing and the date of selling/redeeming are more than 365 days, you do not have to pay any tax at all.

Start investing in mutual funds today! 

Happy investing!

Disclaimer: the views expressed here are those of the author. Mutual funds are subject to market risks. Please read the offer document before investing. All returns written above were observed on 8th of November, 2017.