Last Updated on Jul 30, 2024 by Anjali Chourasiya
Mutual funds have been one of the most famous investments for a long time now. Various types of mutual funds are available in the market, which can confuse an investor. Read below to familiarise yourselves with the equity mutual funds, their types, features, benefits, and a list of the best equity mutual funds in India.
Table of Contents
Best equity mutual funds in India (2023)
| Name | Sub Category | AUM (Rs. in cr.) | Expense Ratio (%) | Volatility (%) | CAGR 5Y (%) | CAGR 3Y (%) |
| Quant Small Cap Fund | Small Cap Fund | 8,075.14 | 0.77 | 14.82 | 30.83 | 48.80 |
| Quant Infrastructure Fund | Sectoral Fund – Infrastructure | 916.11 | 0.77 | 15.65 | 27.61 | 45.06 |
| SBI Tax Advantage Fund-III | Equity Linked Savings Scheme (ELSS) | 31.69 | 0.00 | 8.68 | 26.89 | 30.66 |
| Quant Tax Plan | Equity Linked Savings Scheme (ELSS) | 4,433.80 | 0.76 | 13.39 | 26.51 | 37.38 |
| Axis Small Cap Fund | Small Cap Fund | 15,847.24 | 0.55 | 9.08 | 26.22 | 35.63 |
| Quant Mid Cap Fund | Mid Cap Fund | 2,531.32 | 0.76 | 14.58 | 26.04 | 41.37 |
| Nippon India Small Cap Fund | Small Cap Fund | 34,468.92 | 0.72 | 11.26 | 25.90 | 45.19 |
| SBI LT Advantage Fund-IV | Equity Linked Savings Scheme (ELSS) | 183.93 | 0.00 | 8.88 | 25.01 | 35.89 |
| Quant Active Fund | Multi Cap Fund | 5,348.92 | 0.77 | 14.06 | 24.94 | 34.66 |
| ICICI Pru Smallcap Fund | Small Cap Fund | 6,510.80 | 0.70 | 9.72 | 24.90 | 40.19 |
Note: The data is from 28th September 2023. To get this list of public banks in India on the Tickertape Mutual Fund Screener, apply the below-mentioned filter.
- Category > Equity – Select all
- Plan: Growth
- CAGR 5Y: Set to High – Sort from highest to lowest
Details of top 3 equity mutual funds
Quant Small Cap Fund
Founded in October 1996, Quant Small Cap Fund is an open-ended equity scheme predominantly investing in small-cap stocks. The Net Asset Value (NAV) of this fund is Rs. 195.32 as of 28th September 2023. An exit load is applicable on this fund if redeemed or switched out on or before the completion of 1-yr from the date of allotments of units. The minimum investment amounts for different types of investments are as follows.
- New investors – Rs. 5,000/- and any amount thereafter
- Existing investors: Rs. 1,000/- and any amount thereafter
- Systematic Investment Plan (SIP) investors: the minimum amount is Rs. 1,000/- and in multiples of Rs. 1 thereafter.
Regular and direct plans are available for this scheme. As per the Tickertape Scorecard, the fund has generated better returns than other funds in the same category. Further, the fund has generated better price returns than the bank FD. Quant Small Cap Fund has a lower expense ratio, which implies better returns over the long term. However, significant holdings of the fund have underlying red flags. Know more about the fund here.
Quant Infrastructure Fund
Founded in September 2007, Quant Infrastructure Fund is an open-ended thematic fund following an infrastructure theme. Its benchmark index is Nifty Infrastructure – TRI. The NAV of the fund is Rs. 27.98 as of 28th September 2023. There is no lock-in period for this fund. However, if you redeem the units before 3 months of allotment of units, then a 0.50% exit load will be applicable. The minimum investment amounts for different types of investments are as follows.
- New investor: Rs. 5,000/- and any amount thereafter
- Existing investors, Rs. 1,000/- and any amount thereafter
- Systematic Investment Plan (SIP) investors: The minimum amount is Rs. 1,000/- and in multiples of Re. 1 thereafter.
As per the Tickertape Scorecard, the fund has been able to generate better returns compared to other funds in the same category. Quant Infrastructure Fund has a low expense ratio of 0.77%, which implies better returns over the long term. Further, the fund has generated better price returns than the bank FD. Learn more about the fund here.
SBI Tax Advantage Fund-III
Founded in 2014, SBI Tax Advantage Fund-III is a closed-ended ELSS Equity scheme which belongs to SBI Mutual Fund House. The fund is benchmarked against S&P BSE 500 index. As of 28th September 2023, the NAV of the fund is Rs. 74.50.
There’s a 3-yr lock-in period for this fund with no exit load. The minimum investment amount for this fund is zero, and you can increase this in multiples of Rs. 100. If you looking to invest a lump sum amount, the minimum amount needed to be invested is Rs. 500.
As per the Tickertape Scorecard, the fund has generated better returns compared to other funds in the same category and the bank FD. In its peer comparison, the fund has a higher 3-yr CAGR of 30.66%. Know more about the fund and its peer comparison here.
What are equity mutual funds?
Equity funds are one of the mutual fund schemes which predominantly invest in the shares of the companies. These are also known as growth funds. The fund manager selects the stocks that deliver maximum returns while controlling the risk. Equity mutual funds offer better returns than debt funds or term deposits. However, there is a certain amount of risk associated with these funds.
Equity mutual funds invest at least 65% of their total assets in equity and equity-related instruments. The fund manager manages the remaining assets based on the investment scheme and objective. These are preferred by investors with long-term goals and looking to gain exposure to the market.
Types of equity mutual funds
These funds are divided into several broad categories, as listed below.
Based on market capitalisation
- Large-cap equity funds: These invest in large-cap companies, i.e. top 100 companies in terms of market capitalisation.
- Mid-cap equity funds: These invest in mid-cap companies that are classified between 101 and 250 in market capitalisation.
- Small-cap equity funds: These funds invest in small-cap companies. Investors should be aware that small-cap funds are more vulnerable to market volatility and risk.
- Multi-cap funds: These invest in stocks with various market capitalisations depending on market conditions.
Based on investment strategy
- Theme and sectoral funds based on investment strategy: An equity fund may follow a particular investment theme, such as an international market or an emerging market. Some schemes may also invest in a specific market sector, such as Banking, Financial Services and Insurance (BFSI), IT, or pharmaceuticals. It’s worth noting that sector or theme-based funds incur a higher risk because they focus on a particular area or theme.
- Focused equity fund: This fund invests in up to 30 equities of companies with market capitalisations that are specified at the time of the scheme’s commencement.
- Contra equity funds: These equity fund schemes look for underperforming equities in the market and buy them at bargain prices with the expectation that they will rebound in the long run.
Based on tax treatment
- Equity Linked Savings Program (ELSS): These funds are the only equity schemes that offer tax benefits under Section 80C of the Income Tax Act. These plans have a 3-yr lock-in period.
- Non-tax saving equity funds: All other equity funds, except for ELSS, are non-tax saving plans. This means that the profits are taxable as capital gains.
Based on investment style
- Active funds: These funds are managed by fund managers who select the stocks to comprise the fund and monitor it carefully for possible rebalancing opportunities to capture maximum returns.
- Passive funds: These funds usually mirror a market index and consist of the same stocks in the same quantity and weightage as the fund’s composition. The fund manager is not involved in the stock selection in these schemes.
Features of equity mutual funds
The features of equity-oriented mutual funds in India are:
- Low expense ratio: According to the Securities and Exchanges Board of India (SEBI), the expense ratio of equity funds should not be more than 2.5%.
- Tax exemption: A tax exemption is provided in the case of ELSS funds (Equity-Linked Savings Scheme). It has a lock-in period of 3 yr and is currently the shortest tax savings scheme available.
- Diversified portfolio: Equity funds provide exposure to various schemes that accept a small amount as well. Hence, the investment portfolio can be diversified.
Benefits of equity mutual funds
Here are some benefits of investing in equity-oriented mutual funds in India:
- Fund managers will manage the investment portfolio.
- Can avail tax exemption benefit on ELSS.
- Can start investing with as little as Rs 500 per month in SIP (Systematic Investment Plan).
- Can diversify the investment portfolio and get exposure to different schemes.
Equity mutual fund taxation as per the 2024 Budget
Understanding the latest tax regulations on equity mutual funds is essential for making informed investment decisions. The Union Budget 2024 has introduced significant changes to the taxation of equity mutual funds, simplifying the tax structure while altering rates and benefits. Here is a detailed breakdown of the new tax rules:
Short-Term Capital Gains (STCG)
If you hold equity mutual funds for less than a year, the gains from these investments are classified as short-term capital gains. According to the new budget, these gains are now taxed at a rate of 20%, which has been increased from the previous rate of 15%.
Long-Term Capital Gains (LTCG)
For equity mutual funds held for more than a year, the gains are considered long-term capital gains. The key points to note under the new budget are:
- Tax-Free Limit: Gains up to Rs. 1.25 lakh in a financial year remain tax-free. This limit has been increased from the previous threshold of Rs. 1 lakh.
- Tax Rate: Any gains above Rs. 1.25 lakh are taxed at a flat rate of 12.5%. It was previously taxed at 10%.
- Indexation: It’s important to note that the benefit of indexation, which previously allowed investors to adjust the purchase price of their assets for inflation, has been removed for all asset classes, including equity mutual funds.
Indexation is a method used to adjust the purchase price of an asset (like property or gold) for inflation over the years. This adjusted price is then used to calculate capital gains. Previously, long-term capital gains from selling property, gold, or other unlisted assets were taxed at 20%, but you could use indexation to reduce your taxable profit. The new rule simplifies the tax structure by setting a flat 12.5% tax rate for all long-term capital gains. However, it removes the indexation benefit.
Summary
| Capital Gains Tax | Holding Period | Old Rate | New Rate |
| Short-Term Capital Gains (STCG) | Less than 12 months | 15% | 20% |
| Long-Term Capital Gains (LTCG) | More than 12 months | 10% | 12.50% |
No Indexation Benefit: This change affects the overall tax liability, potentially increasing it for long-term investors.
Equity vs debt mutual funds
Though equity funds and debt funds belong to the mutual funds family, there are a few differences between these. Equity funds mainly invest in stocks of companies, while debt funds invest in fixed-income securities like Certificates of Deposit (CD), Bonds, government securities and various other debt instruments.
FAQs
What is an equity fund?
An equity fund is a mutual fund scheme that invests in the stocks of companies.
Which equity mutual fund is best?
You can use the Tickertape Mutual Fund Screener to find the best equity mutual funds. You can follow the steps below.
- Login to your account
- Go to Tickertape Mutual Fund Screener
- Select “Equity Mutual Funds” in the category
- Add additional filters like 5 yr CAGR, NAV, Expense Ratio, 3 yr CAGR, and more if needed
- Analyse the funds as per your requirement
Who should invest in the equity funds?
Equity funds are preferred by investors who are looking for long-term investments. However, it depends on the investor’s investment goal, time period and risk appetite.
As an insatiable reader and learner, I’ve spent the last two years exploring the world of finance. With my creative mind and curious spirit, I love making complex finance topics easy and fun for everyone to understand. Join me on my journey as we navigate the world of finance together!
