7 Best Mutual Funds to Invest in 2023 - Top Performing Mutual Funds in India

We are nearing the end of the calendar year 2022, and it is time to welcome 2023. And what better way to welcome the new year by securing your financial future through investments in some of the best mutual funds!

What are equity mutual funds?

Equity mutual funds are schemes that invest predominantly in equities i.e. shares of companies. These schemes invest money pooled from multiple investors in different stocks across sectors with an aim to generate capital appreciation and enable wealth creation. Equity mutual funds have the potential to generate high returns over the long term.

How certain sub-categories of equity mutual fund schemes performed

Data as of November 18, 2022
Category average returns considered using Direct plan - Growth option. Past performance is not an indicator of future returns.
(Source: ACE MF, PersonalFN Research)
 

At PersonalFN, we have curated a list of 7 best performing equity mutual funds to invest in 2023. But before we reveal the list, here is how the equity market behaved in 2022...

The year 2022 began with major equity indices showing sharp consolidation from their lifetime highs on the back of the fast-spreading Omicron variant of COVID-19, followed by the war in Ukraine. The economic uncertainties and inflationary pressures caused by these two factors, along with fears of global recession, caused foreign investors to shy away from investing in Indian equity markets, thus leading to sharp losses for the investors.

However, the tables turned towards the second half of the calendar year as the Indian economy showed resilience compared to global peers, despite facing high inflation. Consequently, the equity market witnessed a sharp rise and once again tested the previous highs. Overall, on a YTD basis, the Nifty 50 has risen by 5.5% (as of November 18, 2022), while the Nifty 500 index rose by 3.7% during the same period, after having risen 24.1% and 30.2%, respectively in the previous calendar year.

How the equity market performed in 2022

Data as of November 18, 2022
(Source: ACE MF)
 

Why invest only in the best mutual funds in 2023?

There are over hundreds of equity mutual fund schemes spread across various sub-categories currently available for investment. Notably, as an individual investor, you only need a maximum of 7-10 schemes in your portfolio to earn optimal returns. However, it is important to note that not all equity mutual funds are worthy of your investment; many schemes fail to beat benchmark returns even over long-term time frames.

[Read: How to Reduce the Number of Schemes in Your Mutual Fund Portfolio]

Since uncertainties concerning global growth are still looming, it is best to focus your attention only on the best mutual fund schemes that have the potential to do well during both the upside and downside market phases.

How does PersonalFN identify the best and top-performing mutual funds for investment?

At PersonalFN, we identify the best mutual fund schemes using our proprietary SMART Score Matrix. We select mutual funds on the basis of 5 variable tests, viz. Systems and Process, Market cycle performance, Asset management style, Risk-reward ratios and Performance Track Record. So, each fund recommended by PersonalFN has to go through our stringent process, where they are tested on these five essential parameters.

This matrix is specially developed by the in-house research team at PersonalFN, and we believe it's one of the finest and most reliable fund selection methodologies in the industry today.

Why? Because it has shown successful results over time! Identifying Long-Term Players Has Been Our Specialty Always!

 

What differentiates our strategy from the rest is that it does not lay very high emphasis on a scheme's short-term performance or popularity but adopts a holistic approach to identify schemes that have the potential to stand the test of time.

Which are the best mutual funds to invest in 2023?

Let us finally take a look at the 7 best equity mutual funds to invest in 2023 for your brighter future.

7 best mutual funds to invest in 2023

Category Best Equity Mutual Funds Absolute (%) CAGR (%)
1-Year 3-Years 5-Years
Large Cap Fund Canara Robeco Bluechip Equity Fund -0.5 18.6 15.7
Flexi Cap Fund Parag Parikh Flexi Cap Fund -4.1 24.1 17.6
Large & Mid Cap Fund Kotak Equity Opportunities Fund 6.8 19.9 13.7
Mid Cap Fund Quant Mid Cap Fund 14.2 36.9 21.6
Small Cap Fund SBI Small Cap Fund 6.9 30.1 17.1
Value Fund ICICI Pru Value Discovery Fund 9.8 25.9 15.0
ELSS Parag Parikh Tax Saver Fund 9.9 25.4 --
Past performance is not an indicator of future returns
Data as of November 18, 2022. Direct Plan-Growth option considered
(Source: ACE MF)
 

Best mutual fund to invest in 2023 - Large Cap Fund category - Canara Robeco Bluechip Equity Fund

As per the SEBI categorisation, Large-cap Funds invest a minimum of 80% of their corpus in equity (stocks) and equity-related instruments of large-cap companies, defined as the top 100 companies in terms of market capitalisation. The advantage of investing in large-cap companies is that they are well-established, with reliable brand equity, competitive advantage, strong balance sheet, and economic moat.

Due to their huge cash reserves and high product demand, large-cap companies are able to manage economic downturns much better than mid and small-cap companies. For this very reason, Large-cap Funds should ideally form a predominant part of every investor's portfolio. One of the best large-cap mutual funds to invest in 2023 is Canara Robeco Bluechip Equity Fund.

Fund Snapshot - Canara Robeco Bluechip Equity Fund

Past performance is not an indicator of future returns
Portfolio data as of October 31, 2022
Returns and NAV data as of November 18, 2022. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Launched over a decade back in August 2010, Canara Robeco Bluechip Equity Fund has shown a complete turnaround performance in the last few years and registered an extraordinary phase to make it to the list of category outperformers. The fund managers' strategy of sticking to index heavyweights that have been driving the index over the last few years has turned in its favour and paid off the investors with superior returns.

The returns generated by Canara Robeco Bluechip Equity Fund over the last 3-year, 5-year, and 7-year periods are far better than the category average and it has also managed to generate alpha over the benchmark index. This outperformance has come at a far reasonable risk when compared to the benchmark and category average, which highlights its potential of generating superior risk-adjusted returns even in stressful conditions.

Click here to read our detailed coverage of the features and performance of Canara Robeco Bluechip Equity Fund.

7 Best Mutual Funds to Invest in 2023 – Top Performing Mutual Funds in India
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Best mutual fund to invest in 2023 - Flexi Cap Fund category - Parag Parikh Flexi Cap Fund

Flexi-cap mutual funds are mandated to invest a minimum of 65% of their assets in equity and equity-related instruments with dynamic asset allocation across large-cap, mid-cap, and small-cap stocks. Due to the flexible investment mandate to invest in equities across market capitalisations, Flexi-cap funds are less risky than pure mid and small-cap funds. Nevertheless, Flexi-cap Funds tend to outperform pure large-cap funds.

One of the best Flexi-cap Funds to invest in 2023 is Parag Parikh Flexi-cap Fund. Launched in May 2013, the fund's orientation remains more towards the value style of investing, whereby it aims to invest in quality stocks across market caps available at reasonable or attractive valuations. The fund also holds some exposure to the stocks of offshore companies such as Alphabet Inc, Microsoft Corporation, Amazon, and Meta.

Fund Snapshot - Parag Parikh Flexi Cap Fund

Past performance is not an indicator of future returns
Portfolio data as of October 31, 2022
Returns and NAV data as of November 18, 2022. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Over the past few years, Parag Parikh Flexi Cap Fund has delivered superior returns and has generated substantial alpha over its benchmark Nifty 500 - TRI and also outpaced most of its category peers.

The focus towards value stocks available at a decent margin of safety has helped Parag Parikh Flexi Cap Fund keep the overall volatility low, while its above-average performance has helped it to generate superior risk-adjusted returns for its investors.

Click here to read our detailed coverage of the features and performance of Parag Parikh Flexi Cap Fund.

Best mutual fund to invest in 2023 - Large & Mid Cap Fund category - Kotak Equity Opportunities Fund

The SEBI has defined Large & Midcap mutual funds as equity-oriented mutual funds that are mandated to invest a minimum of 35% of their corpus in equity and equity-related instruments of large-cap and mid-cap companies listed as the top 250 companies in terms of market capitalisation. Large-cap and mid-cap mutual funds offer investors the best of both worlds, i.e., stability from large-cap stocks and high growth from mid-cap stocks.

One of the best Large & Mid-cap Funds to invest in 2023 is Kotak Equity Opportunities Fund. The scheme is primarily an opportunities-style fund that looks for investment opportunities across various sectors based on the performance and growth potential of companies within the sectors. Kotak Equity Opportunities Fund holds a well-diversified portfolio of stocks spread across market caps by utilising the bottom-up investment strategy.

Fund Snapshot - Kotak Equity Opportunities Fund

Past performance is not an indicator of future returns
Portfolio data as of October 31, 2022
Returns and NAV data as of November 18, 2022. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Kotak Equity Opportunities Fund has a track record of outperforming the benchmark and the category average over longer time periods. Over the long-term period of 5-year and 7-year, KEOF has outpaced many of its peers while its performance has been reasonable compared to the benchmark.

While Kotak Equity opportunities Fund remains heavyweight on cyclicals to ride the market boom and rallies, it also makes well use of defensives during extreme market conditions. This helps the fund perform well across market phases and reward investors over the complete market cycle.

Click here to read our detailed coverage on the features and performance of Kotak Equity Opportunities Fund.

Best mutual fund to invest in 2023 - Mid Cap Fund category - Quant Mid Cap Fund

Mid-cap mutual funds have the mandate to invest a minimum of 65% of their assets in equity and equity-related instruments of mid-cap companies, ranked from 101st to 250th in terms of market capitalisation.

Since these stocks belong to relatively smaller/niche companies, they are less resilient during market downturns. However, they have the potential to generate superior returns in a bull market phase as the stocks of the underlying companies are yet to enter their growth spurt. This is why we would recommend investing in these only if you have a high risk appetite and an investment horizon of at least 5-7 years. One of the best mid-cap funds to invest in 2023 is Quant Midcap Fund.

Fund Snapshot - Quant Mid Cap Fund

Past performance is not an indicator of future returns
Portfolio data as of October 31, 2022
Returns and NAV data as of November 18, 2022. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Quant Midcap Fund is an actively managed small-sized scheme in the Mid-cap Fund category and follows aggressive investment strategies. Despite being small in size, the fund has registered extraordinary performance and handsomely rewarded its investors in the last couple of years. It is now a top-performing midcap fund with superior returns across time frames.

Quant Midcap Fund constantly looks for opportunities across stocks and sectors and is also quick in its approach to shift allocation between market caps depending on the market conditions, which has resulted in significant alpha for its investors.

Best mutual fund to invest in 2023 - Small Cap Fund category - SBI Small Cap Fund

Compared to the other categories, this is by far the riskiest one on our list of best equity mutual funds to invest in 2023. Small-cap Funds are equity-oriented mutual funds mandated to invest at least 65% of their assets in equity and equity-related instruments of small-cap companies. Small-caps are defined as companies ranking beyond 250 in terms of full market capitalisation.

Though Small-caps have high return potential, there are various risks associated with them. At times, if there is a constraint on resources, they may face risk to survival in case of economic downturn. These factors make Small Cap Funds suitable only for investors with very high risk appetite and an investment horizon of at least 7-10 years. One of the best mid-cap funds to invest in 2023 is SBI Small Cap Fund.

Fund Snapshot - SBI Small Cap Fund

Past performance is not an indicator of future returns
Portfolio data as of October 31, 2022
Returns and NAV data as of November 18, 2022. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Launched in September 2009, SBI Small Cap Fund is the second-largest scheme in the Small-cap fund category. The fund has well established itself in the Small-cap Fund category due to its superior long-term track record, wherein it stands among the top quartile performers. Over the longer time period of 5 years and 7 years, the fund outpaced its benchmark by a noticeable margin of around 8 percentage points.

SBI Small Cap Fund is one of the well-managed schemes in the small-cap fund category that has built a solid track record for itself and has rewarded its investors well since its inception. It has a proven track record of timely identifying fundamentally sound stocks in the small-cap space that have turned into multi-baggers and have helped the fund regain its spot among top category performers.

Click here to read our detailed coverage on the features and performance of SBI Small Cap Fund.

(Note: Owing to the large corpus, SBI Small Cap Fund has suspended fresh subscriptions in the scheme via the lump sum mode since September 2020. Furthermore, fresh registrations via the SIP mode are capped at Rs 25,000 per month per PAN since February 2021.)

Best mutual fund to invest in 2023 - Value Fund category - ICICI Pru Value Discovery Fund

Value investing is a time-tested strategy that involves identifying/finding stocks that are trading below their intrinsic value.

A Value Fund is mandated to invest a minimum of 65% of its assets in value stocks across market capitalisation. While value funds tend to underperform during momentum-based market rallies led by growth stocks, time and again, it has been proven that value stocks are the best bet during market downturns. But remember, patience and a long-term investment horizon are necessary when investing in value funds.

One of the best Value Funds to invest in 2023 is ICICI Pru Value Discovery Fund. Launched in August 2004, ICICI Prudential Value Discovery Fund is a true-to-style value-oriented scheme that looks for undervalued stocks having the potential to deliver superior returns.

Fund Snapshot - ICICI Pru Value Discovery Fund

Past performance is not an indicator of future returns
Portfolio data as of October 31, 2022
Returns and NAV data as of November 18, 2022. Regular Plan - Growth Option considered
(Source: ACE MF)
 

The fund currently stands among the top quartile performers in the category across time frames. Moreover, its risk-adjusted returns are among the best in the category and much ahead of the benchmark.

The fund's cautious approach and strong inclination towards value helped it stand strong and limit losses during bearish phases. Moreover, the fund has outpaced the benchmark and many of its peers during market uptrends. The fund avoids investing in momentum-driven bets, which helps it to outpace its peers in the long run, while its large-cap bias adds stability to the portfolio.

Click here to read our detailed coverage on the features and performance of ICICI Pru Value Discovery Fund.

Best mutual fund to invest in 2023 - ELSS category - Parag Parikh Tax Saver Fund

ELSS, also known as tax-saving mutual funds, are diversified equity funds that come with the dual advantage of wealth-building potential and tax-saving benefits. As per SEBI's categorisation norms for mutual funds, ELSS are open-ended schemes with a statutory lock-in of 3 years and tax benefits. ELSS invests a minimum of 80% of its assets in equity & equity-related instruments.

Investment in ELSS is eligible for a deduction under Section 80C of the Income Tax Act up to Rs 1.5 lakh in a financial year. One of the best ELSS to invest in 2023 is Parag Parikh Tax Saver Fund.

Fund Snapshot - Parag Parikh Tax Saver Fund

Past performance is not an indicator of future returns
Portfolio data as of October 31, 2022
Returns and NAV data as of November 18, 2022. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Incepted in July 2019, Parag Parikh Tax Saver Fund is one of the latest entrants in the ELSS category. Despite having a short track record of little over three years, Parag Parikh Tax Saver Fund has grabbed investors' attention by showcasing superior performance. The fund currently stands among the top quartile performers in the ELSS category and stands out in terms of risk-adjusted returns.

Parag Parikh Tax Saver Fund has the flexibility to invest across market caps and sectors. Guided by the principles of value investing, Parag Parikh Tax Saver Fund avoids momentum bets and focuses on fundamentally sound, low-debt businesses available at reasonable valuations. This strategy can prove to be extremely rewarding for investors in the long run.

How much to allocate in the best equity mutual funds for 2023?

Equity mutual funds can generate higher returns compared to debt funds and gold, but note that every category varies in terms of risk-reward profile. Therefore, make sure to select mutual fund schemes that match your risk profile, investment objective, and investment horizon goal. Avoid riskier categories such as Mid Cap Fund and Small Cap Fund if you do not have the appetite to handle intense market volatility.

For instance, conservative investors and investors with moderate risk appetite should ideally have a higher allocation to Large Cap Funds (around 50-70% or more of their equity portfolio), and the balance can be in Value Funds, Flexi Cap Funds, Large & Mid Cap Fund, and ELSS (for tax-saving needs).

On the other hand, aggressive investors can consider allocating 30-50% of their equity assets in Large Cap Funds and the balance in Value Funds, Flexi Cap Funds, Mid Cap Funds, and some portion in Small Cap Funds, along with ELSS (for tax-saving needs).

Avoid investing in equity mutual funds if you have a very short-term investment horizon of, say, 6 months, 1 year, or 2 years.

 

How to invest in the best mutual funds in 2023?

Considering the volatile and uncertain nature of equity markets, take the Systematic Investment Plan (SIP) route while you build the portfolio of the best equity-oriented mutual funds in 2023. Click here to read about the benefits of investing in mutual funds via SIP.

You can also consider opting for the Direct plan option of mutual funds to enhance the portfolio returns, as the expense ratio of Direct plans is around 50-100 bps lower than that of the Regular plan.

If you wish to have super compressive and detailed research reports on the best diversified equity mutual funds to invest in, subscribe to PersonalFN's premium research service, FundSelect.

PersonalFN's FundSelect service provides insightful and practical guidance on the mutual fund schemes to Buy, Hold, and Sell. You will also get access to special reports, which include our latest exclusive report on Factor-based Investing.

At PersonalFN, we apply a host of qualitative and quantitative parameters using the S.M.A.R.T score matrix.

S - Systems and Processes

M - Market Cycle Performance

A - Asset Management Style

R - Risk-Reward Ratios

T - Performance Track Record

The stringent process has helped our valued mutual fund research subscribers to own some of the best mutual fund schemes in their investment portfolio with a commendable long-term performance track record. PersonalFN's service is apt if you are looking for insightful guidance and recommendations on some worthy funds having high growth potential in the years to come.

If you are serious about investing in a rewarding mutual fund scheme, subscribe now!

 

Warm Regards,
Divya Grover
Research Analyst

 

Disclaimer:

The schemes mentioned above are selected on the basis of PersonalFN's SMART Score, which considers various quantitative and qualitative parameters to arrive at fundamentally sound and reliable mutual fund schemes. These schemes may or may not be suitable for you. Hence, it is necessary that you understand your risk appetite and suitability well in case you consider investing in any of these funds. If unsure, do consult your SEBI registered investment advisor.  

This does not constitute investment advice. Returns mentioned herein are in no way a guarantee or promise of future returns. Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully before investing.