Only 21% of Top-Quartile Equity Funds Retained Ranking Over Next Five Years

मुख्य टेकअवे

• Only 21% of equity funds in the top quartile over a five-year period remained there during the next five years on average. 
• For three-year comparison periods, 26% of top-quartile funds retained their ranking. 
• Performance persistence varied considerably across different market cycles. 

Past leadership among equity mutual funds has shown limited persistence over subsequent periods, according to an analysis contained in FundsIndia's October 2026 Wealth Conversations report. 

On average, only 21% of equity mutual funds that ranked in the top quartile over a five-year period remained in the top quartile during the following five-year period. 

For three-year periods, the retention rate was 26%. 

The analysis covered diversified equity categories including large-cap, mid-cap, small-cap, flexi-cap, multi-cap, ELSS, focused and value or contra funds. 

Funds were ranked for an initial period and then compared with their ranking during the immediately following period of the same length. 

Persistence Changed Across Market Cycles 

The headline average masks large differences between individual periods. 

Among schemes that ranked in the top quartile between 2004 and 2008, only 7% retained a top-quartile position from 2009 to 2013. 

For funds leading during 2007–2011, the figure fell to 4% in the following five-year period. 

There were also periods with much stronger persistence. About 48% of funds ranked in the top quartile during 2014–2018 remained there during 2019–2023. 

Three-year comparisons showed similarly wide variations. None of the top-quartile funds in the 2005–2007 measurement period retained that ranking in 2008–2010, while the retention rate reached 66% for funds ranked during 2012–2014 and measured again during 2015–2017. 

Changes in market leadership can affect relative fund rankings because different portfolios have different exposure to market capitalisations, sectors and investment styles. 

A fund leaving the top quartile also does not necessarily mean it generated negative returns. It only means other funds in the comparison group subsequently delivered higher returns. 

The dataset therefore measures historical ranking persistence, rather than whether a specific scheme generated an acceptable absolute return. 

It also reinforces the distinction between a fund's historical position in performance tables and its future return potential. Past performance remains historical information and does not guarantee that a scheme will retain the same ranking in subsequent periods.