Equity mutual funds lose up to 48% in FY26 SIPs

An analysis by ETMutualFunds revealed that equity mutual funds delivered losses of up to 48% on SIP (Systematic Investment Plan) investments in FY26. A total of 556 schemes were reviewed during this period. And out of them, 486 posted negative returns. This is significant as only 70 managed to generate gains.

A deeper look showed that most domestic mutual funds ended in the red, whereas the majority of funds that delivered positive returns were international in nature.

Technology-focused schemes were the worst performers among these. Quant Teck Fund and Motilal Oswal Digital India Fund recorded the steepest declines and fell by approximately 47.17% and 35.38%. This happened during the financial year spanning April 1, 2025, to March 31, 2026 (data as of March 23, 2026). Tata Small Cap Fund also saw a significant drop of 32.56% in SIP returns. Other tech-oriented funds like HDFC Technology Fund, Tata Digital India Fund, and Aditya Birla Sun Life Digital Fund also declined by 31.79%, 30.13%, and 29.63%.

Funds from Motilal Oswal Mutual Fund also struggled. Their Midcap Fund and Multi Cap Fund fell by 28.36% and 27.68%. Similarly, consumption-focused schemes such as Bajaj Finserv Consumption Fund and Sundaram Consumption Fund delivered negative returns of 25.74% and 25.42%.

Invesco India’s Technology Fund and Multicap Fund dropped by 23.47% and 23.39%. Other consumption-oriented schemes, which include Canara Rob Consumer Trends Fund and Mirae Asset Great Consumer Fund, posted losses of 22.01% and 21.98%.

Small-cap funds were also impacted. Kotak Small Cap Fund declined by 20.78%, and HDFC Small Cap Fund fell by 19.66%. ICICI Prudential Small cap Fund and SBI Small Cap Fund registered losses of 18.96% and 18.95%.

Among international offerings, Mirae Asset Hang Seng TECH ETF FoF fell by 18.43%. Quant Small Cap Fund dropped 16.86%, and Quant Mid Cap Fund declined 15.53%. Several ICICI Prudential schemes, which also include large-cap, housing opportunities, flexicap, and focused funds, reported losses in the range of 13.58% to 13.65%.

Parag Parikh Flexi Cap Fund saw a decline of 10.08%. Kotak’s multi-cap and large & mid-cap funds dropped by 9.62% and 9.52%. HDFC Defence Fund, which is the only actively managed defence-focused fund, also slipped 4.99%.

Healthcare funds were among the least affected. Mirae Asset Healthcare Fund and Kotak Healthcare Fund posted marginal declines of 0.19% and 0.08%.

SIP strategy for FY27

Since the domestic funds are largely underperforming in FY26, there are experts who are suggesting a cautious and balanced approach going forward. Vishal Dhawan, who is the Founder & CEO of Plan Ahead Wealth Advisors, advised that investors should maintain core SIP allocations in diversified Indian funds and broad-based international funds. Sector-specific or country-specific investments should be treated as supplementary exposures rather than the primary strategy.

He also emphasized the importance of gradually investing through SIPs and avoiding the temptation to chase recent high returns and rebalancing portfolios periodically. While global exposure can help in diversifying, relying heavily on narrow themes such as technology or specific regions like Taiwan may not be prudent.

Manish Kothari, who is the CEO and Co-founder of ZFunds, had similar views. He suggested that investors seeking global diversification could allocate SIPs toward growth themes such as AI, technology, or funds focused on markets like the US and China.

Top performers

A few funds delivered exceptional returns despite widespread losses. Nippon India Taiwan Equity Fund emerged as the top performer and generated an impressive 164% return on SIP investments in FY26. ICICI Prudential Strategic Metal and Energy Equity FoF also delivered triple-digit returns at 101.22%.

Edelweiss Greater China Equity Offshore Fund and HSBC Asia Pacific (Ex Japan) Fund posted gains of 38.91% and 38.87%. Motilal Oswal Nasdaq 100 FoF returned 20.28%, and Mirae Asset S&P 500 Top 50 ETF FoF delivered 18.51%. ICICI Prudential US Bluechip Equity Fund was the last to offer double-digit returns at 11.18%.

Other gainers included Mirae Asset NYSE FANG+ ETF FoF (5.81%) and SBI PSU Fund (4.40%). WOC Pharma and Healthcare Fund recorded a marginal gain of 0.06%.

Why international funds outperformed

According to Kothari, the strong performance of international funds was largely driven by rallies in AI and technology sectors. However, he noted that SIPs are long-term investment tools that are typically designed for horizons of 10–15 years rather than short-term gains. Fund performance tends to even out over extended periods. And Indian equities have delivered strong returns over the past five years.

He recommended allocating around 10–20% of a portfolio to international markets when it comes to diversification. Primarily focusing on the US with selective exposure to other regions based on individual risk appetite and outlook.

Dhawan added that many global markets and themes are currently trading at relatively high valuations. Meanwhile, India’s valuation premium over other emerging markets has moderated, and domestic economic indicators are showing signs of improvement. While international investments remain useful for diversification and risk management, they should not be driven solely by recent outperformance.

Note: This analysis is based on SIP performance data and does not constitute investment advice.