If you want to maintain a balanced approach to largecaps, midcaps, and smallcaps, then among the various subcategories of equity mutual funds, multi cap funds are a meaningful choice.
Markets move in cycles. At times, it’s largecaps that do well and at other times, smallcaps and midcaps do well.
In this context, the Nifty500 Multicap 50:25:25 – Total Return Index (TRI) in the last 3 years has delivered a compounded average growth rate (CAGR) of 18.7%.
This is higher than the 13.5% CAGR delivered by the Nifty 50 – TRI.
During this time period, the multi cap funds, on average, delivered 18.8% CAGR.
Multi Cap funds have thus demonstrated the potential to generate superior returns for investors in the long run without concentration risk to one market cap segment.
The assets under management (AUM) of these funds, as a result, have grown to Rs 2.2 trillion (tn) from 1.43 tn in September, when the capital market regulator redefined the multi cap fund category.
At present, multi cap funds are mandated to invest at least 75% of their total assets in equities, with a minimum exposure of 25% each in large-cap, mid-cap, and small-cap stocks.
Regardless of the market conditions, a multi cap fund needs to maintain a minimum exposure of 25% to each market cap segment.
If you are a bit aggressive investor, with the stomach for very high risk, do not mind a more tactical exposure to midcaps and smallcaps and have an investment horizon of at least 5-7 years, then multi cap funds can be considered.
That being said, fund selection plays a crucial role so that you are rewarded well on a risk-adjusted basis.
In this editorial, we will take you through 3 best multi cap mutual funds that have performed well on longer-period rolling returns and risk-return metrics such as standard deviation, sharpe ratio, and sortino ratio.
In other words, these funds have fared optimally on a risk-adjusted basis by keeping risks in check.
#1 Nippon India Multi Cap Fund
Launched in March 2005 as Reliance Equity Opportunities Fund, it is now known as Nippon India Multi Cap Fund, after Nippon Life bought a 75% stake in Reliance Capital’s asset management arm in October 2019.
The fund has an appealing track record, clocking nearly 18% CAGR since its inception. Due to this, the fund’s AUM has increased over the years, particularly after April 2021, and currently has assets of Rs 493 billion (bn) as per the October 2025 portfolio – the largest in the multi cap funds subcategory.
Nippon India Multi Cap Fund holds a well-balanced allocation across market caps while being actively managed.
The fund seeks both value and growth, which are likely to commence from the ongoing structural changes in the government policies, infrastructure spending and continuous global economic reforms that try to integrate different economies across the globe.
So, the fund endeavours to continuously analyse the performance of the economy and industry, which would be reflected in the investment pattern of the fund.
For stock selection, the primary approach is ‘top-down’ wherein it looks at sectors à industry à and the company.
While following a top-down approach, it analyses any key policy/ regulation changes, changes in infrastructure spending, economic trends/ indicators, and thereby sector-wise impact, which then translates into allocation of funds in that sector/ company.
That being said, the fund does not restrict itself to a top-down approach but, on a case-by-case basis, also uses the ‘bottom-up’ approach, wherein it looks at the company à industry à and the sector.
This approach includes micro-level analysis of corporate profitability, vision and future business prospects of the company, capital structure, product profile, market share, competitive edge, research and technological advancement, the policy environment and its responsiveness to align itself to such changes.
The Nippon India Multi Cap Fund prefers to avoid momentum-driven bets and focuses on high-conviction long-term investments. It emphasises building a portfolio comprising market leaders, sustainable alpha creators, and emerging/niche themes.
Whenever good investment opportunities are not available, or when the equity market is not likely to perform in the view of the fund manager, the fund reduces exposure to equities and invests in debt & money market instruments (up to 25% of the total asset) for defensive considerations.
The fund holds an excessively diversified portfolio of around 115-130 stocks. As per the October 2025 portfolio, it has 130 stocks, of which 48% are largecaps, 25% midcaps, and 25% smallcaps.
The top 10 stocks are 28.8% of the portfolio and include names such as HDFC Bank (5.4%), Axis Bank (4%), GE Vernova T&D India (3%), etc.
Among a diverse range of sectors, the top 3 are banks (14.6%), auto & ancillaries (8.8%), and capital goods (8.8%), comprising 32.2% of its portfolio.
The fund is currently holding cash & cash equivalents around 1.1% of its assets.
The high conviction, buy-and-hold approach followed by the fund is reflected by its low portfolio turnover, which has ranged between 18-24% in the last one year.
Such a strategy followed has rewarded investors quite well. The compounded annualised rolling returns over 3 years and 5 years are 25.1% and 29.8%, respectively.
This is noticeably higher than the category average and its benchmark, the Nifty 500 Multicap 50:25:25 – TRI (as of 14 November 2025).
The risk the fund has exposed its investors to is also low (standard deviation of 13.09) compared to the category average and the benchmark.
On a risk-adjusted basis, the fund has delivered appealing risk-adjusted returns reflected by the sharpe and sortino ratios of 0.38 and 0.75, respectively, better than the category average and the benchmark.
#2 Axis Multicap Fund
Launched in December 2021, this fund has showcased a commendable performance track record. Since its inception, it has clocked a CAGR of 16.6% with disciplined investing.
Today, it is among the top 10 multi cap mutual funds by AUM, managing assets worth nearly 91 bn as of October 2025.
The fund while managing its portfolio actively in line with its multi cap mandate, adopts a bottom-up stock selection process.
It focuses on the appreciation potential of individual stocks from a fundamental perspective. The emphasis is on identifying the best ideas within each market cap bucket.
It aspires to capture potential opportunities throughout the lifecycle of the company’s progression from smallcap all the way to a largecap.
Through this approach, the fund aims to achieve a quality-centric long-term portfolio with an improved risk-reward profile and controlling fund volatility typically faced during fund rebalancing.
The fund house employs a ‘Fair value’ based research process to analyse the appreciation potential of each stock in its universe. Fair value is the intrinsic worth of the company.
The stocks are selected from companies having robust business models with sustainable competitive advantages compared to their competitors. The fund follows holistic risk management strategies, which are embedded in the investment process.
For defensive considerations, it has the mandate to invest up to 25% of its total assets in debt and money market instruments. It can invest up to 10% in units of REITs & InvITs.
The fund holds a very diversified portfolio of over 100 stocks. As per the October 2025 portfolio, the fund has 125 stocks, of which 47% are largecaps, 26% midcaps, and 25% smallcaps.
The top 10 stocks are 26.8% of the portfolio and include names such as HDFC Bank (6%), ICICI Bank (3.8%), Reliance (3.3%), etc.
The top 3 sectors of the fund are banks (16.6%), auto & ancillaries (11.4%), and healthcare (11.2%), comprising 30.2% of its portfolio.
The fund is fully invested and is currently holding 1% of its total assets in cash & cash equivalents.
In the last one year, the portfolio turnover ratio of the fund has ranged between 41-61%, which reflects that it generally follows a buy-and-hold approach.
Such an approach has rewarded its investors decently. The compounded annualised rolling returns over 3 years are 23.4%, better than the Nifty 500 Multicap 50:25:25 – TRI and the category average (as of 14 November 2025).
The risk the fund has exposed its investors to is slightly high (standard deviation of 13.77) compared to the category average and the benchmark.
However, on a risk-adjusted return, the fund has compensated its investors well, as reflected by the sharpe and sortino ratios of 0.37 and 0.72, respectively, which are better than the category average and the benchmark.
#3 ICICI Prudential Multicap Fund
This is one of the oldest funds launched in October 1994 as ICICI Prudential Top 200 Fund. With effect from September 2015, it was rechristened and renamed ICICI Prudential Multicap Fund.
Backed by its impressive performance (15.1% CAGR since inception), the fund’s AUM has increased over the year, and today it is over Rs 160 bn – the 5th largest in the subcategory of multi cap funds.
The fund follows a blend of growth and value investing strategies to select high-conviction stocks across market capitalisations.
It aims to invest in high-conviction quality stocks. The fund is benchmark and sector-agnostic and uses a combination of the ‘top-down’ and ‘bottom-up’ approach for stock selection.
The ‘top-down’ approach is to identify the macro-economic conditions and underlying trends.
This process is then followed by the ‘bottom-up’ approach, which involves selecting stocks with good growth prospects, low leverage, good corporate governance, robust financials, and good cash flow management.
Like its peers, ICICI Prudential Multicap Fund also holds a highly diversified portfolio of around 90-150 stocks. As per the October 2025 portfolio, the fund has 151 stocks, of which 38% are largecaps, 30% midcaps, and 29% smallcaps.
The top 10 stocks are 24.7% of the portfolio and include names such as Bharti Airtel (4%), Vedanta (3.2%), HDFC Bank (3%), etc.
Among a wide range of sectors, the top 3 sectors of the fund are chemicals (8.9%), auto & ancillaries (8.4%), and banks (8%), comprising 25.3% of its portfolio.
Currently, the fund is holding 2.2% and 0.6% of its total assets in cash & cash equivalents and treasury bills, respectively.
The fund does not hesitate from occasional churning. In the last one year, the portfolio turnover ratio of the fund has ranged between 62-98%, in the endeavour to deliver returns.
The strategy followed has yielded compounded annualised rolling returns of 21.7% and 25.7%, over 3 years and 5 years, respectively.
This is better than the category average and the benchmark, the Nifty 500 Multicap 50:25:25 – TRI (as of 14 November 2025).
The fund has exposed investors to low risk (standard deviation of 11.75) compared to the category average and the benchmark.
Thus, on risk-adjusted returns, reflected by the sharpe and sortino ratios of 0.37 and 0.8, respectively, the fund has done better than the category average and benchmark.
In fact, on the sortino ratio – which captures the downside risk while speaking about risk-adjusted returns – the fund has fared better.
Performance of the 3 Best Multi Cap Mutual Funds
| Scheme Name | Absolute (%) | CAGR (%) | Risk Ratios | |||
| 1 Year | 3 Years | 5 Years | SD Annualised | Sharpe | Sortino | |
| Nippon India Multi Cap Fund | 10.4 | 25.1 | 29.8 | 13.09 | 0.38 | 0.75 |
| Axis Multicap Fund | 14.1 | 23.4 | – | 13.77 | 0.37 | 0.72 |
| ICICI Pru Multicap Fund | 9.5 | 21.7 | 25.2 | 11.75 | 0.37 | 0.80 |
| Category Average* | 8.4 | 21.0 | 25.7 | 13.50 | 0.31 | 0.60 |
| Nifty500 Multicap 50:25:25 – TRI | 6.9 | 18.7 | – | 13.65 | 0.28 | 0.56 |
Data as of 14 November 2025. Rolling period returns are calculated using the Direct Plan-Growth option. Returns over 1 year are compounded annualised. Standard Deviation indicates the risk, while the sharpe ratio and sortino ratios measure the Risk-Adjusted Return. They are calculated over 3 years, assuming a risk-free rate of 6% p.a. *All multi-cap funds are considered for category average purposes. #Nifty500 Multicap 50:25:25 index was launched on 2 December 2020. Please note that returns here are historical returns. Past performance is not an indicator of future returns. The securities quoted are for illustration only and are not recommendatory. Speak to your investment advisor for further assistance before investing.
Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully.
What Should Investors Know Before Investing in Multi cap Mutual Funds?
Multi cap mutual funds have a cumulative exposure of 50% (25% + 25%) to midcaps and smallcaps, while the remaining 25% is invested in largecaps. This classifies them as a very high-risk, high-return investment proposition.
Bull markets tend to favour midcaps and smallcaps, but during bear markets or corrections, these stocks fall more than large caps.
That said, compared to pure mid cap funds and small cap funds, multi cap funds are likely to be less volatile, especially in phases of intense market volatility and uncertainty.
In volatile times such as at present, taking the SIP route may prove beneficial as opposed to making a lump sum investment.
SIP, with its inherent rupee-cost averaging feature, may help mitigate risks.
When you choose funds for your portfolio, do not place much emphasis on recent past returns, which may or may not repeat in the future.
Be a thoughtful investor.
Happy investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here… The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary
