Equity Mutual Funds Drop Up to 48% in FY26 — Are You Still Investing?
From the desk
## Market Reality Check: What Happened in FY26?
The latest analysis by ETMutualFunds has revealed a sharp correction in the market. Out of 556 schemes analyzed, nearly 486 equity mutual funds delivered negative SIP returns, with losses going as deep as 48%.
👉 Only 70 funds managed to generate positive returns, highlighting how challenging FY26 has been for investors.
This data clearly indicates that short-term volatility can significantly impact even disciplined SIP investors.
## Top Losers: Which Funds Were Hit the Hardest?
Technology-focused funds were among the worst performers:
- Quant Teck Fund: -47.17%
- Motilal Oswal Digital India Fund: -35.38%
- Tata Small Cap Fund: -32.56%
Other notable declines:
- HDFC Technology Fund: -31.79%
- Tata Digital India Fund: -30.13%
- Aditya Birla Sun Life Digital Fund: -29.63%
Even diversified and mid-cap strategies struggled:
- Motilal Oswal Midcap Fund: -28.36%
- Motilal Oswal Multi Cap Fund: -27.68%
👉 This clearly shows that sector concentration and mid/small-cap exposure amplified downside risks.
## Sector-Wise Impact
### 1. Technology Funds
- Biggest losers due to global correction in tech stocks
### 2. Consumption Funds
- Declined ~20–25%
- Example: Bajaj Finserv Consumption Fund
### 3. Small Cap Funds
- Kotak Small Cap Fund: -20.78%
- HDFC Small Cap Fund: -19.66%
### 4. Healthcare Funds (Least Impacted)
- Mirae Asset Healthcare Fund: -0.19%
- Kotak Healthcare Fund: -0.08%
👉 Defensive sectors like healthcare proved more resilient.
## Why International Funds Outperformed
Interestingly, most funds that delivered positive returns were international funds.
Top performers:
- Nippon India Taiwan Equity Fund: +164%
- ICICI Prudential Strategic Metal & Energy FoF: +101%
- Edelweiss Greater China Fund: +38.91%
- Motilal Oswal Nasdaq 100 FoF: +20.28%
### Key Reasons:
- AI & tech rally in global markets
- Strong US market performance
- Currency advantage (USD strength)
👉 This highlights the importance of global diversification in your portfolio.
## What Should Investors Do in FY27? (Expert Strategy)
Financial experts recommend a balanced and disciplined approach:
### 1. Continue SIPs (Don’t Panic)
SIPs are designed for 10–15 year horizons, not short-term gains.
### 2. Focus on Diversification
Maintain allocation across:
- Domestic diversified funds
- International funds (10–20%)
### 3. Avoid Overexposure to Themes
- Don’t rely heavily on tech or single-country funds
- Avoid chasing recent top performers
### 4. Rebalance Regularly
- Review portfolio every 6–12 months
- Adjust based on market conditions
## What the FY26 Data Shows About Portfolio Construction
Two observations follow from the ETMutualFunds dataset above. Both are descriptions of what happened in FY26, not a view on what happens next:
👉 The widest drawdowns in the dataset sat in sector and single-theme funds; the narrowest sat in diversified and defensive categories.
👉 The SIP returns quoted here are measured over one financial year, which is far shorter than the horizon these schemes are designed for.
Which schemes, if any, suit a particular portfolio depends on that investor's goals, time horizon and risk profile. Gayatri Financial Synergy is an AMFI-registered mutual fund distributor (ARN-169480); this article is information, not investment advice, and not a recommendation to buy, hold or avoid any scheme.
## Key Takeaways
✔ FY26 was a tough year for equity investors
✔ 486 out of 556 funds delivered negative returns
✔ Tech & small-cap funds were hit the hardest
✔ International funds outperformed due to global trends
✔ SIP is a disciplined, long-horizon investing method — and this dataset covers a single financial year, not a full cycle
## Conclusion
One financial year of negative SIP returns is a drawdown in the record, not a verdict on a category. What the FY26 dataset documents is narrower than the headlines suggest:
- The losses were concentrated in sector and thematic funds
- Diversified categories recorded smaller declines than single-theme categories
- International funds recorded positive returns over the period, for the reasons listed above
How any of this bears on a particular portfolio depends on that investor's goals, horizon and risk profile, and is worth working through with someone qualified to advise on it. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Past performance is not indicative of future returns.