Index funds vs active funds in India: who wins?
Aeterna Wealth · figures from our fund data, updated 5 Nov 2026
Over the last 3 years, 116 of 232 diversified active Regular plans beat their category's total-return index, and 86 of 183 over 5 years. In large caps: 12 of 30. Index funds win on cost and certainty; active funds have a better case in mid caps, small caps and flexible mandates, if you pick well.
By category
- Large Cap: 12 of 30 beat the index over 3 years, 12 of 27 over 5.
- Large & Mid Cap: 13 of 26 beat the index over 3 years, 11 of 26 over 5.
- Mid Cap: 15 of 28 beat the index over 3 years, 6 of 21 over 5.
- Small Cap: 11 of 25 beat the index over 3 years, 11 of 21 over 5.
- Flexi Cap: 20 of 36 beat the index over 3 years, 13 of 27 over 5.
- Multi Cap: 14 of 23 beat the index over 3 years, 5 of 9 over 5.
- Focused: 16 of 27 beat the index over 3 years, 13 of 22 over 5.
- ELSS: 15 of 37 beat the index over 3 years, 15 of 30 over 5.
The cost gap
A Nifty 50 index fund's Direct plan can cost as little as 0.10% a year (median 0.24%); a typical large cap Regular plan costs about 2.21%. That gap is a head start the active fund has to make up every year.
A sensible mix
- Large caps: a low-cost index fund as the core is hard to beat.
- Mid and small caps, flexi caps: active funds with a consistent record against their index can add value.
- Between index funds on the same index, choose on cost and tracking error.
Common questions
Do index funds beat active funds in India?
In large caps, most active funds have not beaten their index over 3 and 5 years. In other categories the record is more mixed.
Which index fund is best?
Index funds on the same index hold the same stocks; compare them on expense ratio and tracking error.
Are index funds safe?
They carry the full risk of the market they track; they remove the risk of a fund manager underperforming.
Want this worked out for your money?
A first conversation is free. We reply within one working day.
More guides
- Regular vs Direct mutual funds: what the extra cost buys
- How to choose a mutual fund: a six-step check
- SIP or lump sum? What the data says
- Mutual fund overlap: why owning six funds can mean owning one
- Tax on mutual fund gains in 2025-26: LTCG, STCG and how to save
- PMS vs mutual funds: costs, tax and who each suits
General information, not investment or tax advice for your situation. Mutual fund investments are subject to market risks; read all scheme-related documents carefully. Past performance does not guarantee future returns.