Investors often get attracted to mutual funds that generate extraordinary short-term returns. Over the last one year, several mutual funds — particularly global thematic, commodity-linked, and sector-focused funds — have delivered exceptional gains ranging from 50% to 187% returns. However, an important question investors should ask is: Are these funds suitable for long-term investing, or are they benefiting from temporary market cycles? In this article, we analyse the top 10 mutual funds that delivered the highest returns in the last one year, understand the reasons behind their performance, and evaluate whether investors should consider investing now.
Top 10 Mutual Funds with Highest Returns in the Last 1 Year
| Mutual Fund | 1 Yr Return (%) | 3 Yr Return (%) | 5 Yr Return (%) | 10 Yr Return (%) |
|---|---|---|---|---|
| DSP World Gold Mining Overseas Equity Omni FoF | 187.0 | 65.7 | 33.2 | 20.6 |
| DSP World Mining Overseas Equity Omni FoF | 111.6 | 28.5 | 21.0 | 21.4 |
| Nippon India Taiwan Equity Fund | 100.6 | 45.7 | — | — |
| ICICI Prudential Strategic Metal and Energy Equity FoF | 87.0 | 35.8 | — | — |
| HSBC Brazil Fund | 64.9 | 20.6 | 10.8 | 10.9 |
| Edelweiss Emerging Markets Opportunities Equity Offshore Fund | 60.3 | 23.5 | 8.0 | 13.0 |
| DSP Global Clean Energy Overseas Equity Omni FoF | 57.3 | 16.9 | 13.3 | 10.0 |
| HSBC Global Emerging Markets Fund | 56.3 | 24.6 | 9.1 | 13.5 |
| Kotak Global Emerging Market Overseas Equity Omni FoF | 54.8 | 23.3 | 9.4 | 12.1 |
| Motilal Oswal Nifty India Defence Index Fund | 54.3 | — | — | — |
Returns are based on latest available data and meant for illustration purposes.
Why Did These Mutual Funds Deliver Such High Returns?
1. Commodity Supercycle Tailwinds
Gold mining and global mining funds topped the performance charts primarily due to strong rallies in gold, copper, and industrial metals. Rising geopolitical tensions, inflation concerns, and central bank buying supported commodity prices globally.
Earlier we covered some of these funds as part of 16 High Return Mutual Funds with Over 30% CAGR in the Last 3 Years.
2. Global Sectoral Opportunities
Several funds in the list invest outside India in themes like clean energy, emerging markets, and strategic metals. These sectors witnessed strong capital inflows globally during the last year.
3. Defence and Strategic Manufacturing Boom
The Indian defence sector saw strong policy support, increasing domestic manufacturing, and rising order books, which boosted returns of defence-focused index funds.
While such funds can provide abnormal returns, some of the funds like defence funds can even have severe downfall too. Check out article on 10 Mutual Funds That Crashed the Most in the Last 3 Months in 2025 (-7% to -15%).
4. Emerging Market Recovery
Countries like Brazil and Taiwan benefited from improving economic outlook and technology-driven growth, leading to sharp rallies in related equity markets.
MyInvestmentIdeas Analysis: What Investors Should Understand
While one-year returns look impressive, investors should avoid making decisions purely based on recent performance. A closer observation shows that most of these funds fall into highly cyclical or thematic categories.
Key observations:
- Majority of top performers are international or commodity-linked funds, not diversified equity funds.
- Returns are driven largely by macro trends, not consistent stock selection alone.
- Many funds have shorter track records in Indian investor portfolios.
- Volatility levels in such funds can be significantly higher than diversified mutual funds.
Historically, thematic funds tend to outperform sharply during favourable cycles but may underperform for extended periods once the cycle reverses.
Important Note: Restrictions on Fresh Investments in International Funds
Investors should also be aware that several global and international mutual funds have temporarily restricted or suspended fresh investments (lump sum or SIPs) at various times due to regulatory limits.
The Securities and Exchange Board of India (SEBI) has prescribed overseas investment limits for the mutual fund industry. Since many fund houses have already approached these limits, some international schemes periodically restrict inflows to manage compliance with these guidelines.
What this means for investors:
- New investments or SIP registrations may not always be available.
- Existing SIPs could continue, but fresh lump sum investments may be paused.
- Availability can change depending on regulatory headroom and market conditions.
Hence, investors planning allocation to global funds should check the latest investment status with the respective AMC before making decisions.
Risks Investors Should Consider
Before investing in these high-return funds, consider the following risks:
- Sector Concentration Risk: Heavy exposure to a single theme or commodity.
- Global Market Risk: Currency fluctuations and international market volatility.
- Cyclical Performance: Commodity and sectoral rallies may not sustain.
- High Volatility: Sharp corrections are common after strong rallies.
Should You Invest in These Mutual Funds Now?
Investors should treat these funds as satellite portfolio allocations rather than core investments.
Suitable for:
- Investors with high risk appetite
- Long investment horizon (5+ years)
- Those looking for global diversification
Not suitable for:
- Conservative investors
- Investors seeking stable returns
- Short-term investment goals
A balanced approach would be to allocate only a small portion (5–15%) of your portfolio to thematic or international opportunities while keeping the majority in diversified equity funds.
Conclusion
The last year has shown how quickly thematic and global mutual funds can generate extraordinary returns when macroeconomic trends align. However, chasing past performance can be risky.
Instead of investing solely based on one-year returns, investors should evaluate long-term consistency, diversification benefits, and risk tolerance before investing.
High-return mutual funds can enhance portfolio returns — but only when used strategically as part of a well-diversified investment plan.
Disclaimer: Mutual fund investments are subject to market risks. Investors should read all scheme-related documents carefully before investing and consult a financial advisor if required.
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