Indian Large-Cap Funds Lag Benchmarks: AMFI Data
By Market Desk
AMFI data shows 71% of Indian large-cap and 76% of mid-cap mutual funds underperformed benchmarks over 5 years, primarily due to higher expense ratios.
A recent analysis of Association of Mutual Funds in India (AMFI) data confirms that most active equity managers are struggling to consistently outperform their benchmark indices. As of July 2026, the majority of large-cap and mid-cap schemes in India have underperformed over a five-year period.
Specifically, 71% of large-cap funds failed to surpass their benchmarks, alongside an even higher 76% of mid-cap funds. In contrast, the small-cap segment showed greater resilience, with only 43% of funds trailing their benchmarks, suggesting active stock selection remains more effective in less-liquid segments.
Expense Ratio Disparity
A primary factor contributing to this widespread underperformance is the significant disparity in cost structures between active and passive investment products. Active large-cap funds carry notably higher average expense ratios, directly impacting net returns.
- Active Large-Cap Funds (Regular Plans): 1.73%
- Active Large-Cap Funds (Direct Plans): 0.73%
- Index Funds (Nifty 50 or Nifty 100 Average): 0.46%
- Nifty 50 Exchange Traded Funds (Average): 0.06%
These higher costs necessitate that active managers generate substantial additional returns just to match the performance of a low-cost index fund post-fees. The consistent erosion of assets by expense ratios makes outperformance a steeper challenge.
Global Performance Context
Despite these domestic challenges, Indian active funds generally demonstrate a better performance track record when compared to international counterparts. India’s underperformance rates across one, three, five, and ten-year horizons are consistently lower than the global median.
Notably, India’s ten-year underperformance rate ranks among the lowest globally, indicating that active management here might still offer more competitive results than in highly developed markets like the US or UK. For investors, the data suggests passive index funds offer more predictable outcomes for large-cap exposure, while active management may retain value in mid-cap and small-cap strategies where stock selection can still differentiate returns.