Top 5 Diversified Equity Mutual Funds in India
21 Jan 2026 8 mins Mutual Funds
In an ever-evolving financial landscape, investing in diversified equity mutual funds has emerged as a strategic choice for investors seeking growth while managing risks. With numerous options available, identifying the right fund can be a daunting task. This article focuses on the best mutual funds in India, specifically the top 5 diversified equity mutual funds that offer a blend of stability and growth potential. We will cover performance metrics, expert opinions, and actionable insights to assist you in making informed investment decisions.
Understanding Diversified Equity Mutual Funds
Diversified equity mutual funds invest in a wide range of stocks across various sectors, which helps in reducing risk while providing exposure to equity markets. By spreading investments across different companies and industries, these funds aim to achieve capital appreciation over the long term. Here are key characteristics of diversified equity mutual funds:
Risk Mitigation: Investing in various sectors helps to cushion against market volatility. For instance, if one sector underperforms, investments in other sectors can offset potential losses.
Professional Management: Fund managers use their expertise to select stocks that align with the fund's objectives. They conduct extensive research and analysis to make informed decisions.
Liquidity: Investors can redeem their units at any time, providing easy access to funds. This liquidity is vital for investors who may need to access their capital quickly.
Tax Benefits: Certain diversified equity mutual funds qualify for tax exemptions under Section 80C of the Income Tax Act, making them attractive for tax-saving investments.
Key Factors to Consider When Choosing a Diversified Equity Mutual Fund
Investors should evaluate several factors when selecting a diversified equity mutual fund:
Performance History
Review the fund's past performance over different time frames. A consistent track record of returns can indicate effective management. For example, consider looking at the fund's performance during market downturns to assess its resilience.
Expense Ratio
The expense ratio is the annual fee charged by the fund manager. A lower expense ratio can significantly impact long-term returns. For instance, a 1% higher expense ratio can erode returns by 20% over 30 years, underscoring the importance of this metric.
Fund Manager's Expertise
The experience and track record of the fund manager play a crucial role in the fund's performance. Research the manager's past funds and their performance to gauge their investment acumen. A seasoned manager with a successful history can be a strong indicator of future performance.
Investment Strategy
Different funds have varying investment strategies. Some may focus on large-cap stocks, while others may invest in mid or small-cap companies. Understand the fund's strategy to ensure it aligns with your investment goals. For example, if you prefer higher growth potential with more risk, a mid-cap focused fund may be suitable.
Top 5 Diversified Equity Mutual Funds in India
Based on recent performance metrics, expert recommendations, and overall market conditions, here are the top 5 diversified equity mutual funds in India for 2023:
Fund Name | Expense Ratio | 3-Year Annualized Return | 5-Year Annualized Return | AUM (in Crores) |
|---|---|---|---|---|
HDFC Diversified Equity Fund | 1.10% | 18.5% | 15.8% | 30,000 |
SBI Blue Chip Fund | 1.05% | 17.2% | 14.5% | 40,000 |
ICICI Prudential Equity Fund | 1.15% | 19.0% | 16.0% | 25,000 |
Axis Long Term Equity Fund | 1.00% | 20.0% | 17.5% | 35,000 |
Franklin India Equity Fund | 1.20% | 16.5% | 14.0% | 28,000 |
Detailed Insights into Each Fund
HDFC Diversified Equity Fund
The HDFC Diversified Equity Fund is one of the best-performing funds in the Indian market. With a strong management team and a focus on large-cap stocks, the fund has consistently provided attractive returns. The fund's expense ratio stands at 1.10%, which is competitive compared to its peers. Additionally, its 3-year annualized return of 18.5% and a 5-year return of 15.8% make it a solid choice for long-term investors. As of 2023, the fund has invested significantly in sectors like technology and pharmaceuticals, which have shown resilience and growth potential in recent years.
SBI Blue Chip Fund
As a flagship offering from SBI Mutual Fund, the SBI Blue Chip Fund primarily invests in large-cap stocks. With an expense ratio of 1.05%, it offers a favorable cost structure along with a 3-year return of 17.2% and a 5-year return of 14.5%. This fund is ideal for investors looking for stability and growth in their portfolios. The fund has a strong emphasis on companies with robust fundamentals and a history of consistent dividend payouts, making it a reliable choice for conservative investors.
ICICI Prudential Equity Fund
The ICICI Prudential Equity Fund has gained popularity due to its robust performance and active management style. With an expense ratio of 1.15%, the fund has delivered a remarkable 3-year annualized return of 19.0%. Its investment strategy focuses on identifying high-growth potential companies, making it suitable for growth-oriented investors. The fund has recently increased its exposure to sectors such as renewable energy and consumer goods, capitalizing on emerging market trends.
Axis Long Term Equity Fund
Axis Long Term Equity Fund is known for its strong performance and tax-saving benefits under Section 80C. With an expense ratio of 1.00%, it boasts a 3-year return of 20.0% and a 5-year return of 17.5%. This fund is particularly attractive for investors seeking long-term capital appreciation while enjoying tax benefits. The fund has a well-diversified portfolio with significant allocations to financial services and healthcare sectors, which are expected to perform well in the long term due to ongoing reforms and increased consumer spending.
Franklin India Equity Fund
Despite recent challenges, the Franklin India Equity Fund remains a well-regarded choice in the diversified equity category. The fund's expense ratio is 1.20%, with a 3-year annualized return of 16.5%. Investors looking for a well-diversified portfolio may find this fund appealing, given its strategic investments across various sectors. The fund has been focusing on mid-cap stocks with strong growth potential, which can provide substantial returns as the market recovers.
Actionable Steps for Investing in Mutual Funds
Investing in diversified equity mutual funds can be a straightforward process if you follow these steps:
Assess Your Risk Tolerance: Understand your risk appetite before investing. This will help you select the right funds. Tools like risk assessment questionnaires can assist in determining your comfort level with market fluctuations.
Set Clear Financial Goals: Whether it's for retirement, education, or wealth creation, having clear objectives is essential. Define specific monetary goals and timelines to keep your investments focused.
Research Funds: Use platforms and tools to compare different funds based on performance, expense ratios, and management teams. Websites like Value Research and Morningstar provide comprehensive analyses and comparisons.
Diversify Your Portfolio: Don't put all your money into one fund. Spread your investments across different funds to mitigate risk. A well-diversified portfolio can include a mix of equity, debt, and hybrid funds.
Regularly Review Your Investments: Monitor your portfolio periodically to ensure it aligns with your financial goals and market conditions. Consider setting up alerts for significant market changes that may affect your investments.
Frequently Asked Questions (FAQs)
What are diversified equity mutual funds?
Diversified equity mutual funds invest in a variety of stocks across different sectors, minimizing risk while aiming for capital growth. They provide investors with a comprehensive exposure to the equity market without the need to pick individual stocks.
How do I choose the right mutual fund?
Consider factors such as past performance, expense ratios, fund manager experience, and your own financial goals when selecting a mutual fund. Additionally, evaluate the fund's investment philosophy and alignment with your risk tolerance.
Are diversified equity mutual funds safe?
While they are less risky than investing in individual stocks, diversified equity mutual funds are still subject to market risks. It's crucial to assess your risk tolerance before investing, especially in volatile market conditions.
What is the typical return of diversified equity mutual funds?
Returns can vary widely based on market conditions and fund management, but a good diversified equity fund typically aims for annualized returns between 12% to 20% over the long term. Historical performance should be analyzed in the context of market cycles.
Can I invest in mutual funds through SIPs?
Yes, Systematic Investment Plans (SIPs) allow you to invest a fixed amount regularly, which can be an effective way to build wealth over time. SIPs also help in averaging the cost of investment and mitigating the risks associated with market timing.
Find the Best Mutual Funds for your every investment goal. Explore top mutual funds and start your SIP Today!
Find the Best Credit Card for your spending habits. Explore top credit cards and maximize your rewards.
Get a Personal Loan that fits your needs. Apply for loans from Rs 1000 to Rs 15 Lakhs with competitive rates.
Author - Abhishek Sonawane
Abhishek Sonawane, an MBA graduate from the prestigious Indian Institute of Management Visakhapatnam (IIMV), brings over ten years of experience in the finance domain. His extensive background includes various roles in financial management and strategy, providing him with a comprehensive understanding of the financial landscape. Abhishek’s expertise and dedication to financial education make him an authoritative voice in personal finance, helping readers make informed financial decisions.