Consistent winners: Mutual funds outshine Nifty 500 TRI over 1–5 year period

A broad-based analysis of mutual fund performance in the post-COVID market cycle shows that several schemes have consistently outperformed the Nifty 500 Total Return Index (TRI) across 1-year, 2-year, 3-year, 4-year, and 5-year horizons, highlighting sustained alpha generation beyond liquidity-driven rallies.

The study, based on internal data as of April 13, 2026, uses the Nifty 500 TRI as the benchmark to capture total market returns across market capitalisations while accounting for dividend reinvestment—ensuring a like-to-like comparison with fund performance.

According to Ankush Prajapati, a mutual fund investment expert, “Rallies reward momentum. Post-rally phases reward discipline,” underlining the importance of consistency over short-term outperformance.

Midcap and small-cap funds

A key trend emerging from the data is the strong dominance of midcap and small-cap funds in delivering superior returns across timeframes. Funds such as ICICI Prudential Mid Cap Fund, HDFC Mid Cap Fund, Nippon India Growth Mid Cap Fund, and Invesco India Mid Cap Fund have delivered robust returns, often significantly exceeding benchmark performance.

For instance, ICICI Prudential Mid Cap Fund delivered 27.63% (1-year), 12.77% (2-year), and 25.08% (3-year) returns, far above the Nifty 500 TRI’s 7.89%, 4.39%, and 15.12% respectively. Similarly, Nippon India Growth Mid Cap Fund and HDFC Mid Cap Fund also feature among consistent outperformers across multiple horizons.

Small-cap funds such as DSP Small Cap Fund, Nippon India Small Cap Fund, and Union Small Cap Fund have also generated strong alpha, particularly over longer periods, benefiting from broader market participation and earnings expansion in the segment.

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Large & mid cap and flexi cap funds

While midcaps led returns, large & mid cap and flexi cap funds have demonstrated relatively stable and consistent outperformance. Schemes like Bandhan Large & Mid Cap Fund, Invesco India Large & Mid Cap Fund, and HDFC Large & Mid Cap Fund have outpaced the benchmark across multiple timeframes.

Flexi cap funds such as Aditya Birla Sun Life Flexi Cap Fund and Edelweiss Flexi Cap Fund have also maintained steady performance, reflecting effective allocation across market caps during varying market conditions.

Category-wide alpha, not isolated outperformance

Importantly, the outperformance is not limited to a handful of schemes but spans across categories—midcap, small-cap, large & mid cap, and even select value and dividend yield funds. This suggests that active fund management has added value in the post-COVID cycle, particularly during phases of market dispersion.

The benchmark comparison further reinforces this trend. The Nifty 500 TRI delivered 7.89% (1-year), 4.39% (2-year), 15.12% (3-year), 11.10% (4-year), and 13.85% (5-year) returns—significantly lower than many actively managed funds in the dataset.

What is being compared?

Think of the Nifty 500 TRI as a “report card” of the entire stock market. It includes the top 500 companies across large, mid, and small caps—and also counts dividends. So, it’s a fair benchmark for overall market performance.

Now, mutual funds are trying to beat this benchmark. If they do, it means the fund manager has added value.

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What does the data show?

The key takeaway: Several mutual funds have beaten the market across all time periods—1 year, 2 years, 3 years, 4 years, and 5 years.

This is important. Many funds can outperform in one year due to luck or a market rally. But consistent outperformance across multiple years signals skill and discipline, not chance.

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