Last Updated on Sep 8, 2022 by Nikitha

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 be confusing for an investor. Read below to familiarise yourselves with best equity mutual funds and its types in India. 

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 its 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

  1. Large-cap equity funds: These invest in large-cap companies i.e. top 100 companies in terms of market capitalisation. 
  2. Mid-cap equity funds: These invest in mid-cap companies that are classified between 101 and 250 in market capitalisation. 
  3. 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.
  4. Multi-cap funds: These invest in stocks with various market capitalisations depending on market conditions.

Based on investment strategy

  1. 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.
  2. 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.
  3. Contra equity funds: These equity fund schemes look for under-performing 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

  1. 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.
  2. 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

  1. 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. 
  2. 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.

10 best equity mutual funds

The list of top 10 equity mutual funds in 2022 is as follows. 

Note: The information is dated 22 June 2022. The parameters used to filter the top 10 equity mutual funds on Tickertape are:

  • Category – Equity
  • Plan – Growth
  • 5-yr CAGR – set from high to low
  • 3-yr CAGR
  • AUM
NameSub CategoryAUMCAGR 3YCAGR 5Y
Tata Digital India FundSectoral Fund – Technology5511.9427.2927.46
ICICI Pru Technology FundSectoral Fund – Technology8772.5030.7327.36
Aditya Birla SL Digital India FundSectoral Fund – Technology3028.4427.4526.50
SBI Technology Opp FundSectoral Fund – Technology2432.2225.4324.21
SBI Tax Advantage Fund-IIIEquity Linked Savings Scheme (ELSS)30.6429.2721.50
SBI LT Advantage Fund-IVEquity Linked Savings Scheme (ELSS)175.7528.9521.02
Quant Infrastructure FundSectoral Fund – Infrastructure582.8630.4621.16
Quant Tax PlanEquity Linked Savings Scheme (ELSS)1358.8131.7220.50
Quant Active FundMulti-Cap Fund2300.2226.6320.09
Franklin India Technology FundSectoral Fund – Technology688.0619.6819.01

1. Tata Digital India Fund

This fund is from Tata Mutual Funds with a minimum investment of Rs 5,000. The expense ratio on Tata Digital India Fund is 0.34%, and the NAV (Net Asset Value) as of 21 June 2022 is Rs 33.4979. 

2. ICICI Pru Technology Fund

This fund is from ICICI Prudential Mutual Funds with a minimum investment of Rs 5,000. The expense ratio on ICICI Pru Technology Fund is 0.71%, and the NAV as of 21 June 2022 is Rs 127.9. 

3. Aditya Birla SL Digital India Fund

This fund is from Aditya Birla Capital Mutual Funds with a minimum investment of Rs 1,000. The expense ratio on Aditya Birla SL Digital India Fund is 0.86%, and the NAV as of 21 June 2022 is Rs 109.19. 

4. SBI Technology Opp Fund

This fund is from SBI Mutual Funds with a minimum investment of Rs 5,000. The expense ratio on SBI Technology Opp Fund is 0.90%, and the NAV as of 21 June 2022 is Rs 75.9648. 

5. SBI Tax Advantage Fund-III

This fund is from SBI Mutual Funds with a minimum investment of Rs 500. The NAV on SBI Tax Advantage Fund-III as of 21 June 2022 is Rs 53.8095. 

6. SBI LT Advantage Fund-IV

This fund is from SBI Mutual Funds. The NAV on SBI LT Advantage Fund-IV as of 21 June 2022 is Rs 28.27. 

7. Quant Infrastructure Fund

This fund is from Quant Mutual Funds with a minimum investment of Rs 5,000. The expense ratio on Quant Infrastructure Fund is 0.64%, and the NAV as of 21 June 2022 is Rs 18.79. 

8. Quant Tax Plan

This fund is from Quant Mutual Funds with a minimum investment of Rs 500. The expense ratio on Quant Tax Plan is 0.57%, and the NAV as of 21 June 2022 is Rs 200.54. 

9. Quant Active Fund

This fund is from Quant Mutual Funds with a minimum investment of Rs 5,000. The expense ratio on Quant Active Fund is 0.58%, and the NAV as of 21 June 2022 is Rs 366.53. 

10. Franklin India Technology Fund

This fund is from Franklin Templeton Investments with a minimum investment of Rs 5000. The expense ratio on Franklin India Technology Fund is 1.46%, and the NAV as of 21 June 2022 is Rs 275.3829. 

Features of equity mutual funds 

The features of equity-oriented mutual funds in India are:

  1. 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%. 
  2. Tax exemption – In the case of ELSS funds (Equity-Linked Savings Scheme), a tax exemption is provided. It has a lock-in period of 3 yrs and, currently the shortest tax savings scheme available. 
  3. 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

Tax on equity mutual funds in India is as follows:

  • If the investment period is less than a year, the returns are taxed at 15%.
  • If the investment period is more than a year and the gains are more than 1 lakh, then the tax levied is 10%. 
  • If the mutual funds pay dividends, then 10% is deducted as Dividend Distribution Tax (DDT).  

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 Certificate of Deposit (CD), Bonds, government securities and various other debt instruments.

FAQs

1. What is an equity fund? 

An equity fund is a mutual fund scheme that invests in the stocks of companies.

2. 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.
1. Login to your account
2. Go to Tickertape Mutual Fund Screener
3. Select “Equity Mutual Funds” in category 
4. Add additional filters like 5 yr CAGR, NAV, Expense Ratio, 3 yr CAGR, and more if needed
5. Analyse the funds as per your requirement

3. 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. 

Nikitha
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