Best Mutual Funds: Five equity mutual funds spanning the large & mid-cap, mid-cap, multicap and small-cap categories have received a five-star rating for August, according to an analysis by Value Research.
These funds stood out for their performance across multiple investment periods, combining strong returns with relatively effective risk-adjusted performance. However, past performance should not be viewed as a guarantee of future returns.
Invesco India Large & MidCap Fund Leads the List
The Invesco India Large & MidCap Fund emerged as one of the strongest performers in the latest assessment. It secured the top position for three-year performance and ranked second over the five-year period.
The fund generated SIP returns of 17.2% over three years and 20.7% over five years.
At the same time, investors should note that the fund has experienced comparatively high volatility. Its standard deviation stood at 18.4%.
The fund’s longer-term journey has also been uneven. It remained behind its category on a five-year rolling-return basis for several years before recently moving ahead.
HSBC Midcap Fund Delivers Strong SIP Returns
The HSBC Midcap Fund claimed the highest position for both three-year and five-year SIP returns.
It delivered 21.2% over three years and 23.6% over five years, making it one of the standout performers among the funds reviewed.
The fund’s alpha was 7.7%, considerably higher than the category’s 1.55%.
However, its historical performance has not always been consistent. The fund underperformed both its benchmark and category for a number of years before turning around and moving ahead from April 2026.
Invesco India Mid Cap Fund Maintains Long-Term Strength
The Invesco India Mid Cap Fund secured the third position in the overall list. It ranked second for three-year SIP returns with 18.9%, while its five-year SIP return stood at 22.7%.
Its strongest showing came over the longer term, where it ranked first over 10 years.
According to the Value Research analysis, the fund has managed to outperform its benchmark by nearly four percentage points annually more often than not. Its approximately 20% annualised return over a decade has also kept it ahead of the index.
Axis Multicap Fund Earns Five-Star Rating
The Axis Multicap Fund, which completed five years, also received a five-star rating.
The fund ranked first in three-year SIP returns, delivering 15.2%. It remained substantially ahead of both its category and its benchmark, the VR Multicap TRI.
Another notable aspect of its performance is that its returns have not been dependent on one overwhelmingly dominant stock, indicating a relatively diversified contribution to performance.
ITI Small Cap Fund Stands Out for Alpha
The ITI Small Cap Fund has completed six years and has emerged as another notable performer.
It ranked second for three-year SIP returns at 20.7% and took the top spot over five years with an impressive 24.6% SIP return.
The fund had spent a considerable period trailing its category and benchmark, the BSE SmallCap 250 TRI. However, its performance improved significantly this year, allowing it to move ahead.
Its 10.8% alpha was significantly higher than the category average of 3.3%.
The fund also achieved these results while recording lower volatility than both its peer group and the benchmark.
Five-Star Mutual Funds: Performance at a Glance
| Fund | Category | 3-Year SIP Return | 5-Year SIP Return | Key Highlight |
|---|---|---|---|---|
| Invesco India Large & MidCap Fund | Large & Mid-cap | 17.2% | 20.7% | Ranked 1st over 3 years and 2nd over 5 years |
| HSBC Midcap Fund | Mid-cap | 21.2% | 23.6% | Highest 3-year and 5-year SIP returns; 7.7% alpha |
| Invesco India Mid Cap Fund | Mid-cap | 18.9% | 22.7% | Ranked 1st over 10 years; around 20% annualised return over a decade |
| Axis Multicap Fund | Multicap | 15.2% | — | Ranked 1st in 3-year SIP returns |
| ITI Small Cap Fund | Small-cap | 20.7% | 24.6% | Ranked 1st over 5 years; 10.8% alpha |
Source: Value Research
How Does Value Research Calculate the Five-Star Rating?
The five-star rating is based on a quantitative assessment that considers both returns and risk.
For equity and hybrid mutual funds, the rating methodology gives greater importance to the five-year performance period. The five-year period carries a 60% weight, while the three-year period accounts for 40%.
This approach allows the rating to consider performance over both medium and longer investment horizons rather than relying solely on recent returns.
Two Mutual Funds Upgraded to Four Stars
Along with the five-star funds, two schemes also received rating upgrades.
The Edelweiss ELSS Tax Saver Fund and HDFC Value Fund were upgraded from three stars to four stars.
Such rating changes can provide investors with another data point when reviewing mutual fund performance, although ratings should not be the only factor considered before investing.
Should You Invest in a Five-Star Mutual Fund?
A five-star rating does not automatically mean that a mutual fund is suitable for every investor.
Before choosing a scheme, investors should evaluate factors such as their risk tolerance, investment time horizon, financial objectives and available investment budget.
Small-cap and mid-cap funds, in particular, can experience significant fluctuations, while strong historical returns may not continue in the future.
Investors should therefore consider their overall financial plan rather than selecting a mutual fund solely because it has received the highest rating.
Bottom Line
The five funds highlighted for August demonstrate strong performance across different equity categories. HSBC Midcap Fund and ITI Small Cap Fund stood out for their five-year SIP returns, while Invesco India Mid Cap Fund showed notable long-term performance.
However, mutual fund ratings are only one part of the investment-selection process. Investors should assess risk, diversification, investment horizon and financial goals before making a decision.
Disclaimer: This article is intended for informational purposes only and should not be considered investment advice. Mutual fund investments are subject to market risks. Investors should assess their individual financial circumstances and consult a qualified financial adviser before making investment decisions.