Only 4 out of 10 actively managed equity funds outperformed their benchmarks over the five-year period ending March 2026.

A deeper analysis shows that 44% of actively managed equity funds managed to beat their respective benchmarks during this time. Out of 315 schemes with a five-year track record, just 139 generated alpha.

However, there is a slight improvement. In March 2025, only 34% of funds had outperformed—so performance has edged up over the past year.

Where Is the outperformance coming from?

Interestingly, the outperformance is not broad-based—it’s highly concentrated in a few categories:

• Contra funds and dividend yield funds stood out, with 100% of schemes generating alpha over the five-year period ending March 2026
• Value funds followed closely with a 75% success rate (12 out of 16 schemes beating benchmarks)
• Small-cap funds ranked next with 55% of schemes outperforming (12 out of 22)

What about the popular categories?

Here’s where it gets more surprising.

Some of the most widely held categories struggled to beat their benchmarks:

• Mid-cap funds: Only 24% (6 out of 25) outperformed
• Large-cap funds: Just 33% beat their indices
• Large & mid-cap funds: About 42% outperformed

This raises an important question: Are investors over-allocating to categories that are less likely to generate alpha?

Let us look at the table to know more:

Category average performance

In terms of category-average performance, only five categories of actively managed equity funds consistently generated alpha over the five-year period ending March 2026 — contra funds, dividend yield funds, value funds, small-cap funds and multi-cap funds.

Among all equity fund categories, contra funds delivered a five-year CAGR of 16.65%, outperforming their benchmark (13.38%) by 3.27%.

Dividend yield funds generated an alpha of 3.10% while value funds delivered an alpha of 1.94% over the same period.

Small-cap and multi-cap funds produced marginal alpha of 0.44% and 0.20%, respectively, over the five-year period ending March 2026.

On the other hand, several popular fund categories such as mid-cap funds, focused funds, and large & mid-cap funds underperformed their benchmarks by a significant margin.

Mid-cap funds underperformed their benchmark by around 2.10% over five years.

Focused funds lagged by 0.91%, while large & mid-cap funds underperformed by 0.61% over the same period.

Overall, despite pockets of strong performance, the broader picture is less encouraging.

Based on the category-average performance of all equity schemes, actively managed funds underperformed their benchmarks by 0.29% over the five-year period ending March 2026.

Here’s the table highlighting category average performance