3 Best Multi Cap Funds for 2025 - Top Performing Multi Cap Mutual Funds in India

In the current calendar year, all Multi Cap Funds offered double-digit returns with 19 out of 23 schemes outpacing the benchmark, as of December 18, 2024. Around 9 schemes generated returns of over 30% during the years. Notably, the benchmark Nifty500 Multicap 50:25:25 - TRI index gave 22.9% returns during this period.

With substantial exposure across the investment universe, Multi Cap Funds can potentially generate superior returns for investors in the long run without any concentration risk. These funds are likely to be less volatile compared to Mid Cap Funds and Small Cap Funds, especially during phases of high market volatility and uncertainty.

In this article, find out the 3 best Multi Cap Mutual Funds for 2025 based on 3-year rolling returns. Before we reveal the list, let us get to know about the category in detail.

What are Multi Cap Mutual Funds?

Multi Cap Funds have existed for many years now. However, the category underwent a change in definition a few years ago. Earlier, in the absence of any restriction on the market cap allocation, most Multi Cap Funds held a predominantly large-cap biased portfolio along with strategic allocation to mid-cap and small-cap stocks.

From September 2020 onwards, Multi Cap Funds are defined as those investing at least 75% of their total assets in equities, with at least 25% exposure each in large-cap, mid-cap, and small-cap stocks. This SEBI move was part of its effort to ensure that Multi Cap Funds hold a diversified portfolio across large-cap, mid-cap, and small-cap companies, are true to their label, and to distinguish it clearly from other scheme categories.

Multi Cap Funds have to maintain the minimum exposure of 25% in each market cap regardless of the market conditions. Large-cap stocks refer to the top 100 publicly listed companies in India by full market capitalisation, mid-cap stocks refer to companies ranking 101st to 250th in terms of full market capitalisation, while companies ranking 251st onwards in terms of full market capitalisation are categorised as small-cap stocks.

What is the outlook for Multi Cap Funds in 2025?

Mid-cap and small-cap stocks did exceptionally well over the last few years compared to their large-cap counterparts.

Since Multi Cap Funds hold substantial allocation to mid-cap and small-cap stocks, the category benefitted from the extraordinary rise in prices of smaller companies. On the other hand, they also benefitted from the notable growth in the large-cap segment.

During bull market phases, such as the one we have witnessed in recent years, Multi Cap Funds can outpace other equity categories such as Large Cap Funds and Flexi Cap Funds because mid-cap and small-cap stocks generally soar higher than large-cap stocks during a broad-based market rally. Consequentially, Multi Cap Funds can benefit from higher allocation in the segment and reward investors with higher gains.

[Read: Flexi Cap Funds v/s Multi Cap Funds: Which Is Better at a Market High?]

However, going ahead if the volatility in the equity market intensifies, which is likely, stocks in the mid-cap and small-cap segments may face liquidity constraints and high volatility. In other words, if the bullish momentum fizzles out in 2025, Multi Cap Funds may witness higher drawdown and can record relatively lower returns. That said, the presence of large caps in the portfolio can offset some of the volatility.

Over a period, Multi Cap Funds can reward investors with superior gains since they have the freedom to select from a large universe of stocks, making them a prudent choice for investors with long-term goals.

Who should consider investing in Multi Cap Mutual Funds?

Multi Cap Funds are suitable for those looking for well-balanced exposure across the investment universe through a single fund. Investors should have a time horizon of at least 5-7 years and have a high risk appetite to tolerate higher volatility associated with mid and small-cap stocks. It would be prudent to assess the current exposure to various market cap segments in the existing mutual fund portfolio and then evaluate Multi Cap Fund's place in the portfolio.

How are Multi Cap Mutual Funds taxed?

Multi Cap Funds follow equity taxation. If you sell your Multi Cap Mutual Funds units within 12 months, the gains will be subject to short-term capital gains (STCG) tax of 20% compared to 15% earlier.

On the other hand, if you sell your Multi Cap Mutual Funds units after completing one year, the gains will be subject to long-term capital gains (LTCG) tax of 12.5% compared to 10% earlier, but only if the gains exceed Rs 1.25 Lakh in a financial year.

Best Multi Cap Fund for 2025 #1: Nippon India Multi Cap Fund

Launched in March 2005, Nippon India Multi Cap Fund is a Multi Cap Fund that has recorded a strong improvement in its performance in recent years by holding a highly diversified portfolio and staying put on some of its high conviction bets despite disappointment in the short term. It stands strong in terms of risk-adjusted returns.

The fund has gained immensely in the last few years as its high conviction calls in the Banking, Engineering, Retail, Hotels, and PSU segments turned out to be rewarding. The fund has done well and flourished under the supervision of Mr Shailesh Raj Bhan, who aims to identify high-growth potential and fundamentally sound stocks across industries that are available at reasonable valuations. The fund manager resists following market momentum and holds each of his high-conviction stocks for the long term.

In the last 3 years, Nippon India Multi Cap Fund has recorded growth at a CAGR of 30.6% on a rolling return basis, higher than the growth of 18.8% in the benchmark Nifty500 Multicap 50:25:25 - TRI index.

Nippon India Multi Cap Fund's top stock holding is dominated by large-cap names such as HDFC Bank, ICICI Bank, Axis Bank, Infosys, and Reliance Industries, followed by a few mid and small-cap names such as GE Vernova T&D India, Linde India, and EIH. Sectorwise, the fund currently has higher exposure in Banking & Finance, followed by Engineering, Auto & Ancillaries, Pharma & Healthcare, and Infotech, among others.

While Nippon India Multi Cap Fund is not a great bear market performer, its performance during bull phases has been commendable. Its focus on maintaining a balanced allocation in fundamentally sound large-cap, mid-cap, and small-cap stocks helps it do well over complete market cycles. Moreover, it has proven its ability to compensate investors well for the level of risk taken by generating noteworthy risk-adjusted returns.

Best Multi Cap Fund for 2025 #2: Kotak Multicap Fund

Launched in September 2021, Kotak Multi Cap Fund aims to invest in sectoral leaders, with a special emphasis on investing in companies that are likely to deliver higher earnings growth than the respective industry in the coming years.

By generating solid growth in NAV within a short time span, Kotak Multi Cap Fund has been slowly emerging as a strong contender in the category, which can be attributed to its ability to timely identify long-term winners across market caps. Its focus on maintaining a well-diversified portfolio spread across sectors has helped it to benefit from the ongoing broad-based market rally.

In the last 3 years, Kotak Multicap Fund has recorded growth at a CAGR of 26.4% on a rolling return basis, higher than the growth of 18.8% in the benchmark Nifty500 Multicap 50:25:25 - TRI index.

Kotak Multicap Fund's top holdings are dominated by large-cap and mid-cap stocks and include higher exposure in Maruti Suzuki India, Hero MotoCorp, Oracle Financial Services Software, SBI, and Mphasis. The fund is bullish on Banking & Finance stocks, along with a preference for Infotech, Auto & Auto Ancillaries, and Retail.

The fund is benchmark agnostic and investment decisions are driven primarily by the growth prospects and valuations of the businesses over a medium to long term as per the discretion of the fund manager. Its fund manager Mr Abhishek Bisen comes with a rich experience and has been associated with Kotak AMC for nearly two decades. This, along with the strong investment process followed at the fund house has been instrumental in offering favourable risk-reward to investors.

Best Multi Cap Fund for 2025 #3: HDFC Multi Cap Fund

Launched in December 2021, HDFC Multi Cap Fund adopts a blend of growth and value style of investing to identify opportunities across market caps. It seeks to invest in companies that are likely to witness steady and secular long-term growth and those that may potentially see a turnaround in profitability and benefit from re-rating.

Since its launch about three years back, HDFC Multi Cap Fund has exhibited tremendous growth, outpacing the benchmark and majority of its peers by a remarkable margin. The fund has benefitted from its high-conviction bets, many of which have been part of the fund's portfolio since its inception. Notably, the fund holds a large portfolio of over 200 stocks to mitigate the risk associated with smaller companies.

In the last 3 years, HDFC Multi Cap Fund has recorded growth at a CAGR of 26.3% on a rolling return basis, higher than the growth of 18.8% in the benchmark Nifty500 Multicap 50:25:25 - TRI index.

Its top holdings mainly comprise large-cap names such as HDFC Bank, ICICI Bank, Infosys, Axis Bank, and Reliance Industries. Its portfolio has a notable inclination towards Banking & Finance that forms about 26% of its assets along with substantial exposure to Infotech, Auto & Ancillaries, Pharma & Healthcare, and Engineering.

Although HDFC Multi Cap Fund is yet to build a reliable long-term track record of consistent performance across market phases, the performance registered by the fund so far is satisfactory. Moreover, it is managed by veteran fund manager Mr Gopal Agarwal and is backed by a process-driven fund house which offers confidence about its prospects.

Conclusion

Diversification across the market cap, viz. large-cap, mid-cap, and small-cap, can help you lower the impact of volatility on your portfolio and thereby earn better risk-adjusted returns. Investing in Multi Cap Funds is a great way to get well-balanced exposure across market caps, which enables diversification and helps in maximising portfolio returns over the long run. Moreover, Multi Cap Funds do not restrict investments to any particular sector, theme, or industry, which helps them benefit from the growth potential of the Indian economy.

However, Multi Cap Funds have limited flexibility to swing allocation to one particular market capitalisation segment depending on the market prospects. In addition, these funds can also be very risky in the short term since they have exposure of at least 50% in small and mid-cap stocks.

Thus, one should ensure the suitability of the scheme to their financial goals. Ideally, prefer the Systematic Investment Plan (SIP) route to invest in the best Multi Cap Funds.

Watch this video to check out the highest return Multi Cap Funds on 10-year SIP:

Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

The securities quoted are for illustration only and are not recommendatory.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.