- Date : 17/08/2023
- Read: 8 mins
There are over 40 AMCs today, offering 2000+ mutual fund schemes. Identifying which equity scheme to invest in can be difficult. We make this task easier by offering information about the best equity mutual funds, how to invest in them, and everything else you need to know.
Here's a list of some of the best Equity Mutual Funds you must look out for in India in September 2023. They are HDFC Infrastructure Fund, giving you 37.24% returns for a year, Quant Small Cap Fund showing 37.01% yearly returns, HDFC Small Cap Fund which gives returns of 36.86% yearly, Franklin India Smaller Companies Fund with 35.83% returns, etc
Best equity mutual funds for investment in India
FAQs about equity mutual funds
1) What are equity mutual funds?
A mutual fund scheme that invests a major portion of its assets in equity and equity-related instruments is known as an equity mutual fund scheme. An equity scheme may invest in shares of various companies as per the scheme objective. From capital gains taxation point of view, a scheme that invests a minimum of 65% of its total assets in equity is classified as an equity scheme.
As per SEBI categorisation of mutual fund schemes, equity schemes are further sub-categorised as follows:
- Multi-cap Fund
- Large-cap Fund
- Large & Mid-cap Fund
- Mid-cap Fund
- Small-cap Fund
- Dividend Yield Fund
- Value Fund
- Focused Fund
- Sectoral/Thematic Fund
- Equity Linked Savings Scheme (ELSS)
2) What are large-cap equity funds?
A large-cap equity fund is an open-ended equity scheme that invests a minimum of 80% of its total assets in equity and equity-related instruments of large-cap companies. The first 100 companies by market capitalisation are classified as large-cap companies. Large-cap companies are also known as blue chip companies. Most of these companies are leaders in their industry and create wealth for their shareholders.
The list of the large-cap companies is prepared by AMFI and uploaded on its website. The list is updated every six months based on data as of the end of June and December. Based on AMFI's updated list, large-cap equity mutual fund schemes have to rebalance their portfolios (if required) within a month. Although all equity mutual funds carry risks, large-cap equity mutual fund schemes are relatively more stable than mid-cap and small-cap equity mutual funds.
3) What is the difference between an actively managed large-cap equity fund and a passively managed large-cap equity fund?
A large-cap equity fund can be an active fund or a passive/index fund, depending on the investing style. For example, Mirae Asset Large Cap Fund is an actively managed large-cap equity fund with the Nifty 100 Index as the benchmark. The fund manager has the mandate to invest a minimum of 80% of the scheme assets in large-cap stocks. However, they can choose which large-cap stocks to buy, and in what quantity. They can also choose to invest up to 20% of the scheme money in stocks other than large-cap stocks.
The Axis Nifty 100 Index Fund is a passively managed large-cap equity fund with the Nifty 100 Index as the benchmark. Passively managed funds are more commonly referred to as index funds. With index funds, the fund manager has the mandate to invest minimum 95% of the scheme assets in the constituents of the Nifty 100 Index as per their weightage.
So, Mirae Asset Large Cap Fund and Axis Nifty 100 Index Fund are large-cap equity funds with the Nifty 100 Index as the benchmark. However, as Mirae Asset Large Cap Fund is actively managed, its objective is to outperform the Nifty 100 Index. On the other hand, as the Axis Nifty 100 Index Fund is passively managed, its objective is to mirror/replicate the Nifty 100 Index.
4) What are mid-cap equity funds?
A mid-cap equity fund is an open-ended equity scheme that invests a minimum of 65% of its total assets in equity and equity-related instruments of mid-cap companies. Companies ranked 101 to 250 by market capitalisation are classified as mid-cap companies.
Mid-cap companies have proved themselves to some extent and have created wealth for their shareholders. They hold more potential for the future and can become large-cap companies and create more wealth for their shareholders. Mid-cap equity mutual funds carry a relatively higher risk than large-cap equity mutual funds, but relatively lower risk than small-cap equity mutual funds.
5) What are small-cap equity funds?
A small-cap equity fund is an open-ended equity scheme that invests a minimum of 65% of its total assets in equity and equity-related instruments of small-cap companies. Companies ranked 251 and onwards by market capitalisation are classified as small-cap companies.
Compared to mid-cap and large-cap companies, small-cap companies are yet to prove themselves in terms of returns to shareholders. Even though small-cap companies are the riskiest, they hold the highest potential to create wealth for their shareholders. Small-cap equity mutual funds carry higher risk as compared to mid-cap and large-cap equity mutual funds.
6) What are regular plans and direct plans in mutual fund schemes?
Every mutual fund scheme offers a regular plan and a direct plan. The difference between these two ways of investing in mutual funds is as follows:
Regular plan: You can invest in a regular plan of a mutual fund scheme through a mutual fund distributor (MFD). As a distributor is involved, the expense ratio of regular plans is higher. A higher expense ratio reduces your net returns from the scheme.
Direct plan: Instead of investing in a mutual fund scheme through a distributor, you can invest directly. These plans are known as direct plans and have been introduced by all AMCs since 2013. They have a lower expense ratio as there is no commission to be paid to a distributor. The NAV of a direct plan is always higher than the NAV of the regular plan for the same scheme.
7) What are the different channels for investing in a mutual fund scheme?
There are several channels through which you can invest in a mutual fund scheme. Some of these include:
- AMC website: You can create an account on the AMC website and invest in the scheme directly.
- AMC branch office: You can visit the AMC branch office and apply for investing in a mutual fund scheme.
- Distributors: You can approach the mutual fund distributor (MFD) associated with the AMC and invest through them.
- Other intermediaries: You can invest in a mutual fund scheme through other intermediaries like banks, stockbrokers, third-party online portals, etc.
8) What is the process of investing in equity mutual funds online?
You can invest in equity mutual funds scheme online through the website of the AMC. It is the simplest and easiest way of investing, and can be done from the comfort of your home. To invest online, take the following steps:
- Register on the AMC website.
- The system will check if you are KYC (Know Your Customer) compliant. If no, you will have to complete your KYC before you can proceed further. You can do this online through the e-KYC process. If you are KYC compliant, the system will allow you to proceed.
- Enter your bank details to debit the lump sum or SIP amount. The AMC will use the same bank account details for credit of redemption proceeds.
- You can now proceed to invest in a specific scheme. Select the scheme name, direct or regular plan, and lump sum/SIP investment. If you choose SIP, you have to select the amount, frequency (weekly, monthly, etc.), the bank account details for the debit of SIP amount, the debit date, and the period for which SIP will continue.
- Filling in the above details and submitting them will complete your investment.
You can log in regularly to your account to monitor the credit of scheme units, ascertain the NAV, and check your progress towards your financial goals.
9) Which are the best AMCs to buy equity mutual funds?
While choosing the best AMC to buy equity mutual funds, you should consider the following selection criteria:
- Is the AMC reputable and experienced?
- How do investors view the AMC and what is their opinion about it?
- Are the sponsors and management team of the AMC credible?
- Does the AMC offer scheme/s that meet your financial planning needs?
- Does the scheme objective match your need?
- Does the AMC have all or most processes digitised, so that you can operate your investment account from anywhere?
Based on the above criteria, some of the AMCs that you may consider include HDFC Mutual Fund, ICICI Prudential Mutual Fund, SBI Mutual Fund, Kotak Mutual Fund, etc.
Apart from evaluating the AMC, you also need to evaluate the scheme you wish to invest in. While selecting a scheme, you should consider the following parameters:
- Does the scheme objective match with your investment objective? (This is the most important criterion.)
- Does the fund manager have the required experience, and how have their earlier schemes performed?
- How has the scheme performed in terms of returns as compared to the benchmark and other peers?
- How does the scheme expense ratio compare with peers?
- How long has the scheme existed? How much AUM (Assets under management) has it garnered? What is the opinion of other investors about the scheme?
- Does the scheme have an exit load? If yes, how much and how is it applicable?
- How is the scheme ranked by entities like CRISIL, Morning Star, Value Research, etc.?
10) Best mobile apps to invest in direct mutual funds?
You can invest in direct plans of equity mutual funds through the following mobile apps:
- Zerodha Coin
- Paytm Money