A lot of us entered 2025 thinking markets would recover fast. But honestly, that hasn’t been the case so far. While large-caps stayed mostly flat and small-caps gave back some gains, a few mutual fund categories quietly did well. In a year marked by global tensions, market volatility, and domestic uncertainty, top-performing mutual funds in India have still managed to shine.
Let us discover the latest report detailing the top-performing mutual funds in India!
Mutual Fund Performance 2025 – Winners & Losers
Out of approximately 1,650 mutual fund schemes across equity, debt, hybrid, and precious metals, about 1,162 funds or 70 per cent, have reported positive year-to-date (YTD) mutual fund returns in 2025.
Defence Funds gave the highest returns so far, with 30.23% growth, followed by Gold Funds at 24.42%. Gold Funds also performed well in the last 1 year with a 30.33% return.
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Over 3 years, PSU Funds gave the best average returns of 34.99%, even though they showed losses in the last year.
On the other hand, Infra, Manufacturing, and Flexicap Funds gave negative returns this year.
This shows that sector-based funds like defence and PSU did well, while some general categories performed poorly in the short term.
| Fund Category | YTD Return (%) | 1-Year Return (%) | 3-Year Return (%) |
| Defence Funds | 30.23 | 12.40 | – |
| Gold Funds | 24.42 | 30.33 | 21.48 |
| Silver Funds | 11.92 | 5.54 | 14.49 |
| BFSI Funds | 8.38 | 15.69 | 20.11 |
| Bank Funds | 8.21 | 8.36 | 19.00 |
| PSU Funds | 4.24 | -5.52 | 34.99 |
| Largecap Funds | 2.96 | 6.07 | 17.29 |
| ESG Funds | 1.66 | 8.24 | 16.87 |
| Auto Funds | 1.52 | -0.98 | 28.67 |
| Focused Funds | 0.18 | 7.51 | 18.60 |
| Value Funds | 0.04 | 4.46 | 21.57 |
| Flexicap Funds | -0.50 | 6.21 | 18.89 |
| Manufacturing Funds | -0.71 | 1.32 | 23.29 |
| Infra Funds | -0.93 | -0.37 | 28.64 |
Indian Equity Markets Face a Bumpy Start
The beginning of 2025 proved difficult for Indian equities. Between January and May 28, the Nifty 50 index showed only a modest gain of 4.68 percent. In contrast, the Nifty Midcap 150 index slipped by 0.46 percent, while the Nifty Smallcap 250 saw a sharper decline of 5.89 percent.
Earlier in the year, the situation was even more severe. The Nifty 50 dropped by as much as 9 percent. On the other hand, the Nifty Midcap and Nifty Smallcap indices fell by nearly 26 percent.
This poor performance came at a time when investors were already worried due to global issues like the India-Pakistan conflict, trade tensions between the US and China, and weak earnings from Indian companies. All of this led to high market volatility and made investors more cautious.
Mutual Fund Performance 2025: Key Sector Winners
So far in 2025, the categories delivering the strongest performance have been defence mutual funds, gold mutual funds, and BFSI mutual funds. Each of these areas has seen strong growth, even as broader market segments have struggled.
The DSP World Gold Fund of Fund (FoF) has emerged as the best-performing mutual fund this year. This overseas fund invests in gold mining companies and has benefited directly from an increase in international gold prices. They are reported to have climbed over 25 percent in just five months.
Gold funds, more broadly, have averaged 24 percent returns so far in 2025.
In parallel, defence mutual funds have average returns above 30 percent, they are currently the top-performing fund category. The key driver behind this rise has been the government’s approval of Rs 54,000 crore worth of defence orders.
The ongoing India-Pakistan conflict has further contributed to investor interest and upward momentum in defence stocks.
Another bright spot in 2025 has been the BFSI mutual funds category. Mutual funds focused on banking, financial services, and insurance have returned an average of 8 percent.
Mutual Funds Investing: Sectors and Funds That Have Underperformed
Not all segments have been so fortunate.
Mutual fund categories tied to the information technology (IT) sector have seen some of the worst results in 2025. IT mutual funds are down over 11 percent YTD, making them the weakest category overall.
This underperformance is largely due to the impact of the US government’s new DOGE (Department of Government Efficiency) initiative, led by Elon Musk. Aimed at cutting government spending, DOGE has caused ripple effects across global tech companies. Tariff tensions and reactions from China, the EU, and other markets have only made matters worse.
Funds focusing on digital themes, including Digital India funds, have also disappointed investors.
Also, because of weak market sentiment and cautious investors, smallcap funds and momentum funds have turned out to be some of the worst performers so far this year.
Investment Outlook and Strategy for 2025
While midcap and smallcap stocks still trade at a premium compared to their long-term averages, specific investment opportunities are beginning to emerge. Experts say that if you’re planning to invest now, putting in a lump sum might work well for hybrid, large-cap, and flexicap funds.
However, for midcap and smallcap funds, it’s better to invest in parts over the next two to three months. If the market drops during this time, it could be a good chance to invest more.
For those considering the best investment funds going forward, areas like defence, gold, and banking/financial services are showing strength. At the same time, investors should remain alert to underperforming themes and prepare for continued volatility.
The idea isn’t to chase the top performer but to build a portfolio that performs well across different stages and market cycles. At the end of the day, patience still matters more than timing.
Source: MoneyControl
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.