Every year, billions of rupees flow into Indian mutual funds on the strength of glossy past returns and five-star ratings. We stepped back and asked a colder question: across the whole universe of active equity funds, how many actually beat a simple index over the long run — and what quietly decides the difference?
73% – 82%
of active large-cap and mid/small-cap funds LOST to their benchmark index over 10 years
1. The index is a brutal benchmark
Over 10 years, the majority of active funds trail a plain index — in category after category.
Active funds that underperformed their benchmark over 10 years
Source: SPIVA India Year-End 2024, S&P Dow Jones Indices.
Buy a typical actively managed large-cap fund, hold it a decade, and there's roughly a 3-in-4 chance it trails a low-cost index fund you could have bought for a fraction of the fee. In mid- and small-caps it's closer to 4 in 5.
2. The longer you hold, the harder active fails
Underperformance climbs with the time horizon — the opposite of the "give it time" pitch.
Large-cap active funds underperforming, by holding period
Source: SPIVA India Year-End 2024. From mid-2024 the large-cap benchmark shifted to the S&P India LargeMidCap.
3. Last year's winner is next year's coin toss
If most funds lose to the index, the obvious move is to just pick the winners. The problem: winners rarely stay winners. S&P's Persistence Scorecards find a top-quartile fund has close to random odds of staying top-quartile next period. A five-star rating describes the past; it carries almost no signal about the future.
4. The silent killer: costs
Every fund charges an annual expense ratio. A "regular" plan bakes in a distributor commission; a "direct" plan doesn't. The gap is usually 0.5–1.0% a year — trivial-sounding, ruinous over a lifetime. Assuming 12% gross returns, a 1% fee gap on a ₹10,000/month SIP over 25 years:
What a ₹10,000/month SIP becomes after 25 years
Direct plan (11.5%)
₹1.74Cr
Regular plan (10.5%)
₹1.46Cr
PaisaToBoltaHai calculation. A 1% fee gap quietly costs ₹27.8 lakh — and none of it carries any market risk.
5. Why this matters to millions
This isn't academic — retail money is pouring in at record pace.
₹65.74L cr
Industry AUM (Mar 2025)
8.38 crore
Live monthly SIP accounts (Apr 2025)
₹26,632 cr
Invested via SIP in one month (Apr 2025)
Source: AMFI monthly data, 2025.
The 5 key takeaways
1
Default to the index for your core.
~3 of 4 large-cap and 4 of 5 mid/small-cap active funds lose over 10 years. Make a low-cost index fund the default; treat active as the exception you must justify.
2
Time exposes active bets — it doesn't rescue them.
Underperformance rises with the holding period. Waiting longer usually widens the gap, not closes it.
3
Ignore star ratings and last year's winners.
Top-quartile funds have near-random odds of staying on top. Never pick a fund because it topped a one-year chart.
4
Costs are the return you control — choose direct.
A 1% expense-ratio gap can cost ₹14–28 lakh over 20–25 years. Buy direct plans; check the TER before the returns.
5
Your behaviour beats your fund pick.
Consistency, asset allocation and staying invested through crashes matter more than which fund you chose.
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Sources: SPIVA India Year-End 2024, S&P Dow Jones Indices; S&P SPIVA Persistence Scorecards; AMFI monthly data, 2025; PaisaToBoltaHai calculations.
Disclaimer: This report is for education and general information only and is not investment, tax or financial advice. Past performance does not indicate future results. Fund categories, benchmarks and regulations change over time; figures reflect the cited reports at their publication dates. Consult a SEBI-registered investment adviser before making decisions. PaisaToBoltaHai does not sell financial products or earn commissions.