The one mutual fund every investor should have

There’s one mutual fund category that’s quietly become the go-to choice for investors seeking stability and growth — and with good reason. They’ve attracted over Rs 56,000 crore in net inflows and delivered impressive risk-adjusted returns. This deep dive unpacks why this set of mutual funds is foundational. We analyse the numbers, break down portfolio trends and reveal the top-performing funds. The best funds today aren’t necessarily the most aggressive or the most conservative — they’re the ones that adapt. That’s why flexi-cap funds have steadily risen in prominence. This isn’t a passing trend. Over the past year, flexi-cap funds have attracted over Rs 56,000 crore in net inflows, making them one of the most trusted equity categories despite market fluctuations. Even during periods of market uncertainty — such as the current correction — the category saw continuous investments, reflecting investors’ growing conviction. The recent inflow pattern reflects not just investor preference, but also increasing awareness of what flexi-cap funds offer: freedom to reposition without structural constraints. What makes flexi-cap funds unique The biggest strength of flexi-cap funds lies in their name — flexibility. As defined by SEBI, these equity schemes are free to invest across large-, mid- and small-cap stocks without any minimum allocation constraints. This sets them apart from other categories like multi-cap and large-and-mid cap funds, which come with rigid allocation rules. Multi-cap funds must maintain at least 25 per cent each in large, mid and small caps, while large-and-mid cap funds must invest a minimum of 35 per cent in both large and mid caps. Such rigidity can become a disadvantage when certain market segments face sharp drawdowns. In contrast, flexi-cap funds can avoid overvalued pockets and shift to more reasonably priced opportunities. As Ajay Khandelwal, fund manager at Motilal Oswal Mutual Fund, puts it: “Multi-cap or large-and-mid cap funds are required to follow SEBI-mandated allocations, whereas a flexi-cap fund has the freedom to allocate dynamically across market caps based purely on market opportunities and valuation comfort. This flexibility enables the fund manager to adjust allocation between large caps for relative stability and mid and small caps for potential growth depending on the prevailing macro environment and market outlook.” Amey Sathe, fund manager at Tata Mutual Fund, echoes this view: “The absence of market capitalisation constraints provides the flexibility to allocate across segments purely based on valuation, fundamentals and market outlook. This becomes especially valuable during periods of elevated market valuations.” Risk and return: The category’s performance Flexi-cap funds aren’t just structurally flexible — they’ve backed it up with solid numbers. Our analysis of three-year performance shows that these funds have delivered on both