Four equity MF categories outshine others in past 3 years

These include midcap, smallcap, pharma and IT funds, each up over 20%

Mutual fund investors would have made good returns by investing in categories such as midcap, smallcap, pharma and technology, over the last three years.

The average return for schemes in each of these four categories is above 20% in the past three years. In comparison, key indices have given annualised returns of less than 8%

Small cap equity schemes, in particular, did quite well as investors could make, on an average, over 31% annualised gains - the highest any category could offer.

This essentially means that a sum of Rs 1,000 invested three years back in small cap equity fund would have turned Rs 2,250 or 2.25 times. Some of the schemes which fall in this category are DSP BlackRock Micro Cap fund, Franklin India Smaller Companies Fund, Reliance Small Cap Fund and Sundaram S.M.I.L.E Fund.

The second in the list are equity funds with an orientation towards technology stocks like Infosys, TCS, HCL, Mindtree and Wipro, among others. They have emerged as the second best performer with a three year annualised gains of 25.15%. Schemes in this category include ICICI Prudential Technology Fund, Birla Sun Life New Millennium Fund, Franklin Infotech Fund and SBI IT Fund.

Similarly, mid-cap equity funds and pharma funds made an annualised return of 24.28% and 23.74%, respectively.

Interestingly, these funds have continued to perform better despite lot of apprehension among market experts as several of the stocks in the category appeared stretched in valuations. However, experts feel that it is not advisable to move out of mid-cap funds in a hurry, despite some of the cracking stocks witnessed in recent past.

According to Kaustubh Belapurkar, director (fund research) at Morningstar India, "It is not advisable for investors with a long-term horizon to move out of the mid and small cap funds. Over the long term, they have outperformed the large-cap funds."

Interestingly, the large-cap equity funds on an average gave returns of 11.4% while multi-cap schemes did a bit better with 16% annualised returns in the last three years.