The Indian mutual fund industry has witnessed remarkable growth in equity funds, with these investment vehicles becoming increasingly popular among retail investors seeking long-term wealth creation through stock market exposure.

Equity funds, which invest predominantly in company stocks, have emerged as a cornerstone of investment portfolios in India. As per SEBI regulations, these funds must invest at least 65% of their assets in equities and equity-related instruments. Assets Under Management (AUM) of Indian Mutual Fund Industry as on January 31, 2025 stood at ₹ 67,25,450 crore. . AMFI data shows that equity mutual fund AUM reached ₹30.57 lakh crore in December. In the same period last year, equity AUM stood at ₹21.79 lakh crore, marking a stellar YoY growth of 40.3%

Categories of Equity Funds

These funds are categorized based on:

  • Market Capitalization
  • Large-cap Funds: They invest in top 100 companies. This type of fund is known to offer stability and sustainable returns, over a period of time. They tend to hold up better in recessions, but they also tend to underperform small-cap stocks when the economy emerges from a recession. Large-cap tend to be less volatile than mid-cap and small-cap stocks and are therefore considered less risky. 
  • Mid-cap Funds: They focus on companies ranked 101-250.  They invest in stocks of mid-size companies, which are still considered developing companies. Mid-cap stocks tend to be riskier than large-cap stocks but less risky than small-cap stocks. Mid-cap stocks, however, tend to offer more growth potential than large-cap stocks.
  • Small-cap Funds: These target companies beyond rank 250. Small cap definition can vary among market intermediaries, but it is generally regarded as a company with a market capitalization of less than Rs. 100 crore. Many small caps are young companies with significant growth potential. However, the risk of failure is greater with small-cap stocks than with large-cap and mid-cap stocks. 
  • Multi-cap Funds or  Diversified Equity Funds invests in stocks of companies across the stock market regardless of size and sector. These funds provide the benefit of diversification by investing in companies spread across sectors and market capitalisation. They are generally meant for investors who seek exposure across the market and do not want to be restricted to any particular sector. 
  • Sectoral/Thematic Funds: Focus on specific industries or themes
  • Investment Strategy
  • Active Funds: Professionally managed portfolios.
  • Passive Funds: These track indices like the Nifty 50 or the Sensex. Index funds and ETFs are passively managed. 
  • Geography

Equity funds are also categorized by whether they are domestic (investing in stocks of only Indian companies) or international (investing in stocks of overseas companies). These can be broad market, regional or single-country funds.

Apart from the above there are equity linked schemes like the Equity Linked Saving Scheme (ELSS) which is an  open  ended scheme with a statutory lock   in   of   3 years   and  it offers  tax benefits

Investment Trends: The strong performance of equity funds has been driven by several factors:

  • Robust economic growth and corporate earnings
  • Increased retail investor participation through Systematic Investment Plans (SIPs)
  • Growing financial literacy and easier access through digital platforms
  • Strong performance of mid and small-cap segments

Investment Considerations

For investors considering equity funds, experts recommend:

  • Long-term Perspective: Equity funds are best suited for investment horizons of 5+ years
  • Risk Assessment: Choose funds aligned with individual risk tolerance
  • Diversification: Maintain a balanced portfolio across market caps
  • Regular Monitoring: Review fund performance and rebalance as needed

Recent Developments

The equity fund landscape has witnessed several significant developments in 2024:

Quote from Mirae Asset Mutual Fund: 

Future Outlook

The future of equity funds in India is supported by:

  • Growing retail investor participation
  • Increasing financialization of savings
  • Strong economic fundamentals
  • Innovation in fund offerings
  • Regulatory support for investor protection

Equity funds have established themselves as a crucial investment vehicle for Indian investors seeking long-term wealth creation. Their ability to provide diversified exposure to the stock market, professional management and potential for higher returns makes them an attractive option for both novice and experienced investors. They also provide varied investment options and tax advantages. 

As India’s investment landscape continues to evolve, equity funds are well-positioned to play an increasingly important role in investor portfolios. However, investors should carefully consider their investment objectives, risk tolerance and time horizon when selecting equity funds, while maintaining a disciplined approach to investing through market cycles.

The combination of strong regulatory oversight, increasing retail participation and innovative product offerings suggests that equity funds will remain a cornerstone of India’s mutual fund industry, helping investors participate in the country’s growth story while managing risks through professional fund management.

Source: AMFI India

For more information on equity mutual funds: Click Here

Disclaimer

The information contained in this document/Video is compiled from third party and publicly available sources and is included for general information purposes only. There can be no assurance and guarantee on the yields. Views expressed by the Fund Manager cannot be construed to be a decision to invest. The statements contained herein are based on current views and involve known and unknown risks and uncertainties. Whilst Mirae Asset Investment Managers (India) Private Limited (the AMC) shall have no responsibility/liability whatso- ever for the accuracy or any use or reliance thereof of such information. The AMC, its associate or sponsors or group companies, its Directors or employees accepts no liability for any loss or damage of any kind resulting out of the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. Any reliance on the accuracy or use of such information shall be done only after consultation to the financial consultant to understand the specific legal, tax or financial implications. 

An Investor Education and Awareness Initiative by Mirae Asset Mutual Fund . All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Center section available on the website of Mirae Asset Mutual Fund.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

Disclaimer:

This article contains sponsored content that may not reflect the independent opinion or views of FinancialExpress.com. Further, FinancialExpress.com cannot be held responsible for the accuracy of any information presented here. Please consult a certified financial advisor before making any decisions based on this article.