India’s top performing mutual fund schemes in December 2025

29 Jan 2026 , 12:16 PM

EQUITY AND DEBT PERFORMANCE IN DECEMBER 2025

For the month of December 2025, Nifty closed  marginally lower, but managed to hold above the psychological 26,000 levels. For the full year 2025, the Nifty was up 10.5%, despite the pressure of global uncertainty, geopolitical risks, and the stiff tariff regime adopted by Trump against India. The investment theme for most investors has been to prefer stable India-specific stories and that is reflected in the mutual fund returns too.

While equity fund NAVs were largely flat in December 2025, bond yields on the benchmark 10-year bonds tapered from 6.68% to 6.58% during the month. For the full year, the bond yields are down from 6.79%.  This can be largely attributed to the dovish policy stance adopted by the RBI since February 2025, having cut rates by 125 bps cumulatively in 2025. That is reflected in the bond fund performance, especially at the long end of the curve. Shorter end funds benefited from the adequate liquidity infusion provided by the RBI.

1)    Equity Large-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Nippon India Large Cap Fund (G)	9.319%	20.214%	21.111%
ICICI Pru Large Cap Fund (G)	11.177%	18.730%	18.589%
HDFC Large Cap Fund (G)	7.844%	16.521%	17.898%
Category Average	7.050%	15.564%	14.922%
Data Source: Morningstar

2)    Equity Large & Mid-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Motilal Oswal Large & Mid Cap (G)	-3.150%	25.881%	24.290%
ICICI Pru Large & Mid-Cap (G)	14.275%	22.049%	23.973%
Bandhan Large & Mid-Cap (G)	7.914%	24.676%	22.232%
Category Average	4.046%	18.929%	18.941%
Data Source: Morningstar

3)    Equity Multi-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Nippon India Multi Cap (G)	4.266%	22.446%	25.884%
Mahindra Manulife Multi Cap (G)	4.203%	21.066%	23.103%
ICICI Pru Multi-Cap Fund (G)	5.559%	20.514%	20.592%
Category Average	2.402%	18.920%	19.950%
Data Source: Morningstar

4)    Equity Flexi-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
HDFC Flexi Cap Fund (G)	11.283%	22.028%	22.292%
Quant Flexi Cap Fund (G)	3.910%	16.811%	23.089%
BOI Flexi Cap Fund (G)	0.501%	22.337%	22.304%
Category Average	2.833%	16.903%	16.530%
Data Source: Morningstar

5)    Equity Mid-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Motilal Oswal Mid-Cap Fund (G)	-12.509%	25.893%	28.795%
Edelweiss Mid-Cap Fund (G)	4.275%	27.247%	26.793%
HDFC Mid-Cap Fund (G)	6.455%	26.056%	26.193%
Category Average	1.722%	21.899%	21.822%
Data Source: Morningstar

6)    Equity Small-Cap Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Small Cap Fund (G)	-2.410%	21.163%	30.521%
Nippon Small Cap Fund (G)	-4.374%	21.916%	28.047%
Bandhan Small Cap Fund (G)	-0.325%	30.890%	27.226%
Category Average	-4.459%	19.584%	23.361%
Data Source: Morningstar

7)    Dynamic Asset Allocation Funds (BAF)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
HDFC BAF (G)	7.401%	18.484%	20.379%
Baroda BNP Paribas BAF (G)	8.327%	15.578%	13.731%
ICICI Prudential BAF (G)	12.295%	14.162%	13.426%
Category Average	5.539%	12.661%	11.417%
Data Source: Morningstar

8)    Multi-Asset Allocation Funds (MAAF)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Quant Multi-Asset Fund (G)	17.653%	22.966%	27.445%
ICICI Pru Multi-Asset Fund (G)	18.778%	20.238%	22.608%
Nippon Multi-Asset Fund (G)	20.721%	22.219%	18.289%
Category Average	16.885%	18.628%	17.445%
Data Source: Morningstar

9)    Arbitrage Funds (Cash-Futures)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Invesco India Arbitrage Fund (G)	7.215%	7.825%	6.700%
Kotak Arbitrage Fund (G)	7.089%	7.817%	6.639%
Edelweiss Arbitrage Fund (G)	7.098%	7.776%	6.614%
Category Average	6.566%	7.170%	5.933%
Data Source: Morningstar

10)           Government Securities Funds (Gilt Funds)

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
ICICI Prudential Gilt Fund (G)	7.334%	8.261%	6.687%
SBI Gilt Fund (G)	5.243%	7.525%	6.158%
DSP Gilt Fund (G)	5.161%	7.810%	6.052%
Category Average	4.580%	6.908%	5.222%
Data Source: Morningstar

11)           Corporate Bond Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
Nippon Corporate Bond (G)	8.175%	8.152%	6.849%
Axis Corporate Debt Fund (G)	8.572%	8.234%	6.684%
ICICI Pru Corporate Bond (G)	8.170%	8.077%	6.677%
Category Average	7.809%	7.656%	5.993%
Data Source: Morningstar

12)           Credit Risk Funds

Top performing Direct Plans (Growth Option) on 5-year returns (as on 30th Dec-25):

Name of Fund	1-Year Return	3-Year Return	5-Year Return
BOI Credit Risk Fund (G)	6.946%	6.365%	26.336%
DSP Credit Risk Fund (G)	22.033%	15.591%	12.023%
Baroda BNP Credit Risk Fund (G)	8.973%	8.725%	10.232%
Category Average	10.667%	9.054%	9.426%
Data Source: Morningstar

Having seen returns for various categories of funds for December 2025, here are some key takeaways for investors.

KEY INVESTOR TAKEAWAYS FROM DEC-25 MF RANKINGS

Here are some key trends we deciphered from the MF rankings for December 2025.

1. Due to volatility in equity markets in 2025, the 1-year returns for most equity fund categories has been either low or in the negative.
2. Funds with exposure to mid-cap and small cap stocks saw low to negative returns over a 1-year period. However, longer term returns are still very attractive.
3. In terms of comparative CAGR, the 5-year returns are converging towards 3-year returns as the dividends of COVID base are slowly vanishing.
4. Unlike in pervious years, the addition of smaller stocks to the portfolio actually became a liability to fund managers, rather than turning out to be an alpha generator.
5. The best category performers across all classes were the multi-asset allocation funds (MAAF) across all time frames. This is largely explained by the exposure to gold.
6. Most of the funds in the top-3 have been able to beat the benchmark index returns. That is a good signal that they are generating genuine alpha.
7. The winners have been consistent over time. In this case, past winners provide with sufficient clues about the possible winners of the future.

While short term returns of mutual funds may have been impacted, the longer-term story across equity and hybrid asset classes are largely intact.

 

LLM Summary Mutual fund category ranks for 2025 and for the 3-year and 5-year period were rather volatile. Clearly, the 3-year CAGR returns on funds are converging to 5-year CAGR returns as the gains of the low COVID base start to diminish on a gradual basis. Among the various categories of funds, it was the hybrid funds that performed the best. However, even in hybrids, the performance was predicated on multi-asset allocation funds, which gained more due to their exposure to gold and silver ETFs. Not only have the fund category leaders beaten the index returns, but winners have also been substantially consistent. This has a critical financial planning perspective. Past returns actually serve as a good barometer of expected returns in the future. Investors must be cautious about funds that give good returns in the longer term but volatile to negative returns over a 1-year period. That is indicative of deep risks taken in the short term, which is not a consistent strategy. That must be taken with a pinch of salt!