Investors in India are increasingly turning to mutual funds as anchor investments. In July 2025, equity-oriented funds alone attracted ₹42,702 crore — a sharp 81% increase over June — continuing a streak of 53 consecutive months of net positive inflows.
With that momentum behind mutual funds, it’s timely to explore which funds delivered top returns in 2025, what makes them appealing, and how you can invest in them in 2026. This guide presents top-performing categories, explains how to evaluate them, and walks you through actionable steps to begin investment.
Why Mutual Funds Are Gaining Momentum in India
Mutual funds pool capital from many investors and invest across equities, debt, commodities, or hybrid instruments, managed by experienced fund managers. For many retail and institutional investors, they offer diversified exposure without requiring deep domain knowledge or heavy capital upfront.
Key factors driving renewed interest in mutual funds in 2025:
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Strong market rebounds after global volatility
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Surge in commodity prices (precious metals) influencing funds tied to metal-linked themes
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Government policy signals supporting infrastructure, public-sector projects, and PSU growth
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Increased investor awareness, financial literacy and SIP (systematic investment plan) adoption
Given such conditions, mutual funds present a compelling way to balance growth and risk — especially for investors with medium to long time horizons.
Top 3 Highest-Return Mutual Fund Categories in 2025
According to recent data from Value Research, three categories stood out for 3-year return performance as of late 2025: silver-themed funds, gold-themed funds, and PSU-thematic equity funds.
Let’s examine each category and the top funds within them.
1. Silver-Themed Funds
These funds invest in silver or silver-linked securities/ETFs rather than stocks or bonds. The surge in silver prices (driven by global demand, currency changes, and retail demand in India) pushed returns sharply upward.
Top Performers (as of 14 October 2025):
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Axis Silver Fund of Fund (FoF) — ~ 46.79%
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Aditya Birla Sun Life Silver ETF FoF — ~ 45.94%
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Nippon India Silver ETF FoF — ~ 45.66%
Note: Because demand surged, some funds (e.g. Axis Silver FoF) paused new investments due to physical silver supply constraints, which caused premiums over actual asset value (NAV).
2. Gold-Themed Funds
Gold-linked mutual funds and ETFs enjoyed renewed investor interest as global uncertainties and inflation concerns buoyed precious-metal demand. Gold funds remained a traditional safe haven, and many investors turned to them as part of diversification strategies.
Top Performers (as of 14 October 2025):
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Edelweiss Gold & Silver ETF FoF — ~ 40.40%
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LIC Mutual Fund Gold ETF FoF — ~ 34.76%
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Aditya Birla Sun Life Gold Fund — ~ 34.62%
Of special interest: Edelweiss Gold & Silver ETF FoF combines both gold and silver in a 50:50 mix — offering balance between gold’s stability and silver’s growth potential.
3. PSU-Thematic Equity Funds
These funds invest in public-sector undertakings (PSUs) — government-controlled companies, often in infrastructure, energy, defense, and public services. They offer exposure to sectors that benefit from public spending, regulatory support, and long-term policy frameworks.
Top Performers (as of 14 October 2025):
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CPSE ETF — ~ 36.95%
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SBI PSU Fund — ~ 33.09%
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Invesco India PSU Equity Fund — ~ 32.68%
These funds attracted investor interest amid increased capital expenditure announcements by the government, and expectations of growth across public-sector-driven sectors.
How These Trends Affect 2026 Investment Plans
The 2025 performance sets a foundation, but successful investing in 2026 requires evaluation of sustainability, diversification, and personal financial goals.
Silver & Gold Funds — Pros and Risks
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Precious metals often act as hedges during global uncertainty, currency depreciation, or inflation inflationary pressure.
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However, metal prices are cyclical; gains may not repeat, and price corrections (or supply-demand distortions) can lead to volatility.
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ETFs and FoFs provide convenience, but metal-linked funds can temporarily halt fresh investment (as seen with Axis Silver FoF), or trade at premiums — which affects entry price.
PSU Funds — What Drives Their Potential
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PSU funds benefit from public investment cycles, government reforms, regulatory support, and preferential policies.
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When economic growth, infrastructure projects, or defense spending increase, PSUs often benefit disproportionately.
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That said, PSU funds can be affected by election cycles, policy uncertainty, and global macro headwinds. Long-term investors with patience and tactical allocation may benefit more than short-term gain seekers.
How to Invest in These Funds in 2026: Step-by-Step Guide
If you are considering investing in mutual funds for 2026, especially in these high-performing categories, here’s a recommended approach:
Step 1: Clarify Your Investment Objectives & Time Horizon
Ask yourself:
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Are you investing for long-term growth (5+ years)?
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Do you want stability, wealth preservation, or aggressive growth?
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Are you comfortable with volatility (especially for metal-linked or equity funds)?
Step 2: Evaluate Fund Details — Not Just Past Returns
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Check expense ratio, fund size, liquidity, and asset holdings.
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For metal funds: check whether they hold physical metal or just ETFs. Premiums over NAV matter.
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For PSU funds: review portfolio concentration (how many companies, sector exposure), government policy backing, and sector outlook.
Step 3: Decide Between Lump-sum, SIP, or Hybrid Approach
Given volatility, consider combining:
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SIP (systematic monthly investment) for averaging cost, especially in equity or metal funds.
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Lump-sum investments if you believe prices are attractive and market conditions favorable.
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Hybrid of both, depending on budget and market view.
Step 4: Diversify Across Asset Classes
Don’t put all money in one fund type. Create a balanced portfolio: e.g. some equity, some gold/silver, maybe debt or hybrid funds, depending on risk appetite and goals.
Step 5: Monitor and Review Periodically
Markets and economic conditions change. Review your investments every 6–12 months. Rebalance if needed, and shift allocation based on performance and external conditions.
Step 6: Understand Exit Strategy and Taxation
Mutual funds in India come with different taxation — long-term vs short-term capital gains, indexation benefits, etc. Plan around taxation while investing. For metal-linked funds, check if there’s any impact of metal price swings on NAV or redemption value.
What Could Affect Performance in 2026 (Risks & Considerations)
Before jumping in, consider the following:
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Global commodity price swings (for gold/silver funds) — metals don’t always rise.
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Inflation, currency fluctuations, and interest-rate changes — these affect investor sentiment, metal demand, and PSU valuations.
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Policy shifts or reforms impacting PSUs — regulatory or fiscal decisions may influence returns.
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Fund-specific constraints — such as suspension of fresh purchases (as in some silver funds), liquidity concerns, or concentration risk in small funds.
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Personal risk appetite — volatility in metal funds or PSU funds may not suit cautious investors.
Sample Portfolio Approaches for 2026
Here are three example strategies — adjust per your risk profile and goals:
Conservative / Moderate Investor
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30% Debt / Liquid fund
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30% Gold-focused fund (e.g. Gold ETF)
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20% Hybrid or balanced fund
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20% PSU equity fund
Goal: balanced growth with some exposure to metal hedges and moderate equity risk.
Balanced Growth Investor
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25% Gold or Gold-Silver ETF
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35% Equity (PSU-themed + diversified equity fund)
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20% Balanced or hybrid fund
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20% Debt or short-term debt fund
Goal: balanced but growth-oriented portfolio, with inflation hedge and equity upside.
Aggressive Growth Investor (Long-term horizon, high risk tolerance)
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40% Equity (including PSU and thematic funds)
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30% Metal-themed funds (Gold + Silver ETFs)
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20% Hybrid / Balanced plus small debt portion
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10% Speculative / Small-cap / SIP for experimentation
Goal: high growth potential, with inflation hedge and diversified risk across sectors.
Why 2026 Could Be a Pivotal Year for Mutual Fund Investors
Several macro factors point toward a favorable environment:
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Inflation has fallen to multi-year lows (as of late 2025), improving real returns from debt and fixed-income funds — making mixed portfolios more attractive.
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Global commodity cycles likely to remain volatile due to geopolitical tensions, currency shifts, and supply-demand imbalance — presenting opportunities in gold and silver.
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Indian government’s planned capital expenditure, infrastructure projects, and public-sector reforms may benefit PSU-linked funds.
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Growing retail participation and financial literacy — more investors are exploring mutual funds as long-term wealth creation tools instead of traditional fixed deposits or single-asset investments.
If markets hold up, 2026 could reward investors who entered early, diversified properly, and remained disciplined in their approach.
Conclusion & Final Observations
Mutual funds — particularly in silver, gold, and PSU equity themes — demonstrated remarkable performance in 2025. For 2026, these funds remain relevant for investors willing to accept moderate to high volatility, interested in diversification, and committed to a medium- to long-term investment horizon.
However, past performance is not a guarantee of future returns. A thoughtful investment approach combining goal clarity, asset allocation discipline, periodic review, and risk awareness remains critical.
By combining data-driven selection, diversification, and periodic review, investors in 2026 can build a balanced, growth-oriented mutual fund portfolio that aligns with personal financial goals and the evolving economic environment.
Disclaimer: This content is for educational purposes only and does not constitute financial advice. Investors should consult financial advisors or experts before making investment decisions.
Frequently Asked Questions (FAQ)
Q1. Are gold/silver mutual funds safe for small investors?
Yes — since you can start with small amounts via systematic investment plans (SIPs) or lump sum. However, these funds are subject to metal price volatility, so they’re more suitable for medium/long-term investors with moderate risk appetite.
Q2. How do PSU funds differ from regular equity funds?
PSU funds invest primarily in public-sector undertakings — companies controlled by the government. Their performance often depends on public policy, infrastructure spending, and regulatory reforms. Regular equity funds invest in private and public companies across sectors.
Q3. Should I stop SIP in silver or gold funds due to high metal prices?
Not necessarily. If your investment horizon is long (5+ years), continuing SIP can average out entry cost over cycles. But monitor valuations, NAV premiums (especially in ETFs), and personal risk tolerance.
Q4. How often should I review my mutual fund portfolio?
It is good practice to review every 6–12 months, or after major financial/tax changes or macroeconomic events. Rebalancing may be needed if asset allocations drift too far from targets.
Q5. What is the impact of taxation on mutual fund returns in India?
Gains from equity mutual funds held over 12 months are taxed at a lower rate (long-term capital gains), while short-term gains are taxed differently. For debt or hybrid funds, holding periods and tax rules differ. Always consider tax implication when planning investments.