Can Indian equities and mutual funds still create long-term wealth for investors?

Indian equities and diversified mutual funds have continued to demonstrate strong long-term wealth creation despite periodic market volatility, according to the latest Wealth Conversations – May 2026 report released by FundsIndia.

The report highlighted that disciplined investing, longer holding periods, and diversified equity exposure have historically delivered meaningful returns for investors across market cycles.

According to the study, the Nifty 50 TRI generated a compounded annualised return (CAGR) of around 11.4% over the last 20 years, multiplying investor wealth nearly 8.7 times. The findings reinforce the long-standing argument that equities remain one of the most effective asset classes for long-term wealth creation in India.

The report also showed that mid-cap and small-cap stocks delivered even stronger returns over extended periods. The Nifty Midcap 150 TRI generated 14.6% CAGR over 20 years, while the Nifty Smallcap 250 TRI delivered 12.7% CAGR during the same period.

Diversified equity mutual funds also outperformed benchmark indices in several cases. Funds such as Nippon India Growth Mid Cap Fund, HDFC Flexi Cap Fund, Franklin India Flexi Cap Fund, and Aditya Birla Sun Life Flexi Cap Fund generated annualised returns ranging between 13% and 15% over 20-year periods.

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The report emphasised that time in the market remains more important than timing the market. Historical data showed that the probability of negative returns declines sharply as investment horizons increase. According to the analysis, there were virtually no instances of negative returns in Nifty 50 TRI over 7-year and 10-year rolling periods.

 

FundsIndia’s analysis further noted that Indian equities delivered returns above 10% in nearly 85% of seven-year investment periods since inception. In several cases, even investments made before major market corrections eventually recovered when investors stayed invested for longer durations.

The report also compared equities with other major asset classes including debt, gold, inflation, and real estate. Over long periods, equities consistently outperformed inflation by 7-9%, debt by 6-8%, and real estate by 5-6%, according to the findings.

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While gold delivered strong short-term performance recently, especially amid global uncertainty, the report suggested that equities continued to remain superior long-term growth assets. Gold generated 14.6% CAGR over 20 years in INR terms, compared with 11.4% for Indian equities, but equities showed stronger long-term compounding potential in diversified portfolios.

The report also highlighted the importance of systematic investing. SIPs and staggered investment strategies such as six-month STPs helped reduce volatility risk and improved long-term return consistency for investors hesitant about lump-sum deployment.

Another key takeaway was that market corrections are a normal part of equity investing. According to the report, the Sensex witnessed temporary declines of 10-20% almost every year, yet nearly 80% of calendar years still ended with positive returns.

The findings come at a time when retail participation in Indian mutual funds remains robust, driven by rising SIP inflows, increasing financial awareness, and a growing preference for long-term equity investing among younger investors.

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