Can multi-cap mutual funds help navigate market uncertainty?

Multi-cap mutual funds are witnessing renewed investor interest as heightened market volatility prompts investors to seek diversified equity exposure. The renewed preference comes amid uncertainty in Indian equities, driven by elevated crude oil prices, sustained foreign portfolio investor (FPI) outflows, pressure on the rupee, and ongoing geopolitical tensions.

Unlike flexi-cap funds, multi-cap schemes are mandated by Sebi to maintain a minimum allocation of 25% each in large-, mid- and small-cap stocks, offering investors exposure across market segments irrespective of market conditions.

"Multi-cap Funds offer investors a well-rounded way to participate across large, mid, and small cap segments within a single portfolio. The fund manager follows a disciplined approach to market cap allocation, balancing exposure across segments through rigorous stock selection," said Shreya Kulkarni, an independent Mumbai-based mutual fund distributor.

"This category can serve as a core diversified allocation, helping investors capture opportunities across the market cap spectrum, subject to their investment objectives and risk profile,” she added.

Performance divergence emerges

Performance data suggests that while the category has generated healthy returns, fund selection remains critical.

According to data from mutualfundindia.com as of June 2026, the top-performing schemes have significantly outperformed both the category average and several peers over longer periods.

Nippon India Multi Cap Fund delivered the highest five-year annualised return of 18.5%, ranking first among peers and securing a first-quartile position. Mahindra Manulife Multi Cap Fund generated a five-year return of 15%, ranking third and maintaining first-quartile performance.

Among the other established schemes, Baroda BNP Paribas Multi Cap Fund delivered 14.2% annualised returns over five years, while Aditya Birla Sun Life Multi-Cap Fund generated 12.6%.

Over the three-year period, Mahindra Manulife Multi Cap Fund emerged as one of the better-performing schemes with annualised returns of 17.8%, placing it in the first quartile and ranking fifth in the category. Nippon India Multi Cap Fund generated 16.7%, while Baroda BNP Paribas and Aditya Birla Sun Life delivered 15.2% and 13.8%, respectively.

As per the data, Mahindra Manulife Multi Cap Fund stands out for maintaining first-quartile performance across both three- and five-year periods. The fund has outperformed its benchmark by approximately 2.56 percentage points over three years and 1.71 percentage points over five years on an annualised basis.

For investors with a five-year-plus investment horizon, multi-cap funds are increasingly emerging as a core allocation strategy, particularly at a time when uncertainty over global growth, inflation and interest rates continues to influence equity markets.

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