With FY26 wrapped up and Q1 FY27 well underway, the category-level performance table tells a story of concentrated winners and a bumpy year for the crowd favourites.
For an industry that has spent much of the past four years explaining how “average” equity fund returns look, FY26 was the year of dispersion. Category-level performance data now available for the completed financial year shows sharp differences between the winners and the laggards, and some of the results run counter to what the previous three years of returns had led investors to expect.
Commodity Funds Take the Top Spot
The clear standouts of FY26 were commodity-linked funds. Gold ETFs, silver-linked schemes, and mining and precious-metal fund-of-funds delivered the best category-level returns of the year. Gold ETFs, in particular, delivered double-digit rupee returns as MCX gold approached Rs 1.5 lakh per 10 grams, aided by a weaker rupee, sustained central-bank buying globally, and geopolitical risk premiums that refused to compress.
Silver-linked schemes and dedicated silver ETFs also had a strong year, benefiting from both the precious-metal complex broadly and industrial demand tied to solar and electric-vehicle applications. Fund-of-fund schemes investing in international mining companies added to the category’s outperformance.
Equities: Mid-Caps Beat Small-Caps
Within equity, the surprise for many investors was the divergence between mid-caps and small-caps. Mid-cap funds delivered the strongest equity category returns for the year, driven by earnings visibility, more diversified exposure, and better resilience through the early-2026 correction. Small-cap funds, which had been the darling of retail investors through 2023 and 2024, ended FY26 as the weakest performers within pure equity, weighed down by valuation compression, foreign portfolio outflows in the segment, and profit-booking after prior years’ outsized gains.
Flexi-cap funds, unsurprisingly given the category’s dominance in inflows, delivered steady mid-teen returns on average, with top performers such as Parag Parikh Flexi Cap and Bank of India Flexi Cap comfortably ahead of the pack. Large-cap active funds continued their pattern of the previous several years — most struggling to beat the Nifty 50 TRI on a full-year basis.
Thematic and sectoral funds turned in a mixed year. PSU-themed funds, which had delivered spectacular numbers in 2024, moderated meaningfully. Defence-themed and manufacturing-themed schemes retained some momentum but with far more subdued numbers than their launch-year marketing had promised.
Debt: Long-Duration Under Pressure
The fixed-income side of the industry had a challenging year. Rising rate expectations through much of FY26, followed by delayed rate cuts as inflation and geopolitics complicated the RBI’s path, left long-duration funds especially poorly positioned. Gilt funds and dynamic bond funds delivered modest returns despite the theoretical setup for duration gains.
Short-duration funds and corporate bond funds fared better, offering yield with limited duration risk. Liquid and ultra-short-term funds delivered steady, if unspectacular, returns that beat traditional savings alternatives on a post-tax basis for many holders.
Hybrid: Balanced Wins the Day
Hybrid funds delivered a range of outcomes closely tied to their equity-debt-gold mix. Multi-asset allocation funds emerged as one of the strongest hybrid categories, benefiting directly from gold’s outperformance and equity’s mid-year rebound. Balanced advantage funds delivered steady returns with lower volatility than pure equity. Equity savings funds remained a niche category with modest returns.
The FY26 performance scorecard is a useful reset for investors who had extrapolated recent years’ returns into the future. Categories rotate. Winners give way to laggards, and the story of any single year rarely predicts the next. For SIP investors staying the course, the disciplined approach continues to look sensible. For those chasing last year’s top performer into next year’s expectations, the current data is may be a reminder to slow down.