54% Equity Mutual Funds Outperformed Benchmarks In Feb, Small Caps Topped The Charts: Report
Small cap funds were able to sustain momentum due to their focus on high-growth companies.
As many as 54% of equity mutual funds outperformed their benchmarks in Feb., according to a report by PL Wealth Management. Despite this, equity mutual funds' assets under management (AUM) saw a 6.97% decline in Feb., signalling subdued investor sentiment amid turbulent market conditions. The AUM, excluding sectoral/thematic funds, dropped from Rs 24.85 lakh crore in Jan. to Rs 23.12 lakh crore in Feb.
The overall AUM decline points to broader market weakness across large, mid, and small-cap indices.
Small cap funds emerged as the winner in Feb. with 79.31% schemes outperforming their benchmark. Meanwhile, focused funds and large and mid-cap funds outperformed their benchmarks by 67.86% and 65.63%, respectively, the report highlighted. PL Wealth Management is part of the Prabhudas Lilladher (PL) group.
According to the report, large cap funds underperformed in Feb., with only 21.88% surpassing their benchmarks. Notably, about 67.02% of the 282 open-ended equity diversified funds outperformed their benchmarks over the year ending Feb. 2025, the data showed.
The reported fluctuation in funds’ performance suggests a response to changing market conditions. During this same period, the Nifty 50 TRI, Nifty Midcap 150 TRI, and Nifty Small Cap 250 TRI recorded monthly returns of -3.49%, -6.58%, and -8.46%, respectively.
How Small Cap Funds Weathered The Market Fluctuation
Small cap funds were able to sustain momentum due to their focus on high-growth companies. Unlike large caps, these funds have an advantage even during market downturns. During a broader market downturn, large cap funds struggle as they comprise bigger, well-established companies that are closely linked to market indices.
A total of 159 category funds were studied for the monthly assessment conducted by PL Wealth Management. “Over the past three years, SIPs have yielded a return over ~12% p.a. on an average for the top quartile equity funds," the report stated, highlighting the benefits of maintaining a long-term investment horizon.
The equity mutual funds market is a new domain for a majority of investors in India, who are shifting from traditional savings and investment schemes in search of higher returns. By the end of January, the total number of registered demat accounts in India had reached 188.14 million.
However, the current market dynamics show that equity investments are much more complex. Investors must focus on understanding market behaviour before making any significant investments to avoid irreparable financial damage.
