Mutual funds remain one of the most attractive investment options for individuals aiming to create long-term wealth through professional fund management. They allow investors to participate in equity and debt markets without directly picking and managing individual securities. While market trends can change rapidly, certain funds have consistently delivered outstanding performance over the last two years. In this article, we highlight the Top 12 mutual funds that outperformed in the last 2 years, delivering returns ranging from 75% to a remarkable 118% in absolute terms. We will discuss their investment objectives, past performance, potential risks, and suitability for different types of investors.
Earlier we wrote about 10 Mutual Funds that Outperformed in Last 1 year with 37% to 82%.
List of Top 12 Mutual Funds Outperformed in Last 2 Years
| Rank | Mutual Fund Scheme | 2-Year Annualised Return (%) | Absolute Return (%) | 1 Lakh would have been (₹) |
|---|---|---|---|---|
| 1 | HDFC Defence Fund | 47.6 | 118% | 2,18,000 |
| 2 | DSP World Gold Fund of Fund | 46.3 | 114% | 2,14,000 |
| 3 | Bandhan Small Cap Fund | 34.4 | 82% | 1,82,000 |
| 4 | Nippon India Taiwan Equity Fund | 33.5 | 80% | 1,80,000 |
| 5 | Invesco India Mid Cap Fund | 33.5 | 80% | 1,80,000 |
| 6 | LIC MF Infrastructure Fund | 32.7 | 78% | 1,78,000 |
| 7 | Invesco India Large & Mid Cap Fund | 32.4 | 77% | 1,77,000 |
| 8 | Invesco India PSU Equity Fund | 32.2 | 76% | 1,76,000 |
| 9 | Motilal Oswal Midcap Fund | 32.1 | 76% | 1,76,000 |
| 10 | Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund | 32.1 | 76% | 1,76,000 |
| 11 | SBI PSU Fund | 31.6 | 75% | 1,75,000 |
| 12 | ICICI Prudential PSU Equity Fund | 31.6 | 75% | 1,75,000 |
Deep Dive into Each Mutual Fund Scheme
#1 – HDFC Defence Fund
Fund Objective: Invests primarily in companies operating in the defence and allied sectors, aiming to capture the growth potential in India’s defence modernization.
Annualised Returns:
- 1 Year: 10.0%
- 2 Years: 47.6% (Absolute: 118%, 1 Lakh would have been: 2.18 Lakhs)
Who Can Invest: Suitable for aggressive investors with a high-risk appetite and long-term horizon.
Risk Factors:
- Sector concentration risk
- Policy and regulatory changes in defence procurement
Investors should not forget that this fund is part of 10 Mutual Funds that lost 20% in in 6 months in 2025 earlier, hence high risk.
#2 – DSP World Gold Fund of Fund
Fund Objective: Invests in BlackRock Global Funds – World Gold Fund, focusing on companies engaged in gold mining worldwide.
Annualised Returns:
- 1 Year: 66.8%
- 2 Years: 46.3% (Absolute: 114%, 1 Lakh would have been: 2.14 Lakhs)
- 3 Years: 33.9%
- 5 Years: 10.2%
- 10 Years: 15.4%
Who Can Invest: Ideal for investors looking to hedge against inflation and diversify via commodity exposure.
Risk Factors:
- Gold price volatility
- Currency fluctuations
#3 – Bandhan Small Cap Fund
Fund Objective: Focuses on small-cap companies with high growth potential.
Annualised Returns:
- 1 Year: 5.7%
- 2 Years: 34.4% (Absolute: 82%, 1 Lakh would have been: 1.82 Lakhs)
- 3 Years: 31.4%
- 5 Years: 34.0%
Who Can Invest: Suitable for investors with a long-term horizon willing to handle high volatility.
Risk Factors:
- High volatility in small-cap segment
- Liquidity risks
This fund is part of 13 Best Mutual Funds Rated as 5 Star by ValueResearch with over 30% CAGR in last 5 years.
#4 – Nippon India Taiwan Equity Fund
Fund Objective: Invests in Taiwanese companies, especially in the semiconductor and technology sectors.
Annualised Returns:
- 1 Year: 39.8%
- 2 Years: 33.5% (Absolute: 80%, 1 Lakh would have been: ₹ 1.8 Lakhs)
- 3 Years: 28.6%
Who Can Invest: Investors looking to benefit from Taiwan’s tech industry boom.
Risk Factors:
- Geopolitical tensions
- Currency volatility
#5 – Invesco India Mid Cap Fund
Fund Objective: Focuses on mid-cap companies with strong growth potential.
Annualised Returns:
- 1 Year: 16.6%
- 2 Years: 33.5% (Absolute: 80%, 1 Lakh would have been: ₹ 1.8 Lakhs)
- 3 Years: 29.2%
- 5 Years: 30.4%
- 10 Years: 19.2%
Who Can Invest: Suitable for investors seeking higher growth than large caps with moderate risk.
Risk Factors:
- Higher volatility than large caps
- Sector concentration risks
We discussed about this fund earlier in Top 10 Mutual Funds that turned 1 Lakh to 10 Lakhs in 15 years.
#6 – LIC MF Infrastructure Fund
Fund Objective: Invests in companies in the infrastructure sector, benefiting from India’s development projects.
Annualised Returns:
- 1 Year: -2.5%
- 2 Years: 32.7% (Absolute: 78%, 1 Lakh would have been: 1.78 Lakhs)
- 3 Years: 28.1%
- 5 Years: 33.0%
- 10 Years: 15.8%
Who Can Invest: Suitable for investors bullish on India’s infrastructure growth story.
Risk Factors:
- Sector-specific risks
- Policy changes
#7 – Invesco India Large & Mid Cap Fund
Fund Objective: Invests in a balanced mix of large and mid-cap companies.
Annualised Returns:
- 1 Year: 14.1%
- 2 Years: 32.4% (Absolute: 77%, 1 Lakh would have been: 1.77 Lakhs)
- 3 Years: 26.4%
- 5 Years: 26.1%
- 10 Years: 16.8%
Who Can Invest: Investors looking for a blend of stability and growth.
Risk Factors:
- Market volatility
- Economic slowdown risks
#8 – Invesco India PSU Equity Fund
Fund Objective: Invests in Public Sector Undertakings across sectors.
Annualised Returns:
- 1 Year: -4.4%
- 2 Years: 32.2% (Absolute: 76%, 1 Lakh would have been: 1.76 Lakhs)
- 3 Years: 32.3%
- 5 Years: 29.4%
- 10 Years: 17.4%
Who Can Invest: Suitable for investors confident in PSU turnaround stories.
Risk Factors:
- Policy changes
- Sector-specific volatility
#9 – Motilal Oswal Midcap Fund
Fund Objective: Focuses on mid-cap companies with strong earnings potential.
Annualised Returns:
- 1 Year: 4.9%
- 2 Years: 32.1% (Absolute: 76%, 1 Lakh would have been: 1.76 Lakhs)
- 3 Years: 29.4%
- 5 Years: 35.4%
- 10 Years: 18.3%
Who Can Invest: Growth-focused investors seeking mid-cap exposure.
Risk Factors:
- Higher volatility
- Sector rotation risks
We analysed this mutual fund among 7 Mutual Funds that turned 1 Lakh to 5 Lakh in 5 years.
#10 – Mirae Asset Global X Artificial Intelligence & Technology ETF Fund of Fund
Fund Objective: Tracks companies focused on AI and technology innovation.
Annualised Returns:
- 1 Year: 39.6%
- 2 Years: 32.1% (Absolute: 76%, 1 Lakh would have been: 1.76 Lakhs)
Who Can Invest: Aggressive investors betting on emerging tech trends.
Risk Factors:
- High volatility
- Emerging technology risks
#11 – SBI PSU Fund
Fund Objective: Invests in PSU companies with growth potential.
Annualised Returns:
- 1 Year: -4.5%
- 2 Years: 31.6% (Absolute: 75%, 1 Lakh would have been: 1.75 Lakhs)
- 3 Years: 32.5%
- 5 Years: 31.3%
- 10 Years: 13.5%
Who Can Invest: Suitable for investors optimistic about PSU revival.
Risk Factors:
- Market volatility
- Government policy changes
Long Term investors can add some portion of the portfolio in any of the recommended mutual funds in Best International Mutual Funds to invest in 2025.
#12 – ICICI Prudential PSU Equity Fund
Fund Objective: Focuses on PSU companies across sectors.
Annualised Returns:
- 1 Year: -5.2%
- 2 Years: 31.6% (Absolute: 75%, 1 Lakh would have been: 1.75 Lakhs)
Who Can Invest: Investors looking for sector-specific opportunities.
Risk Factors:
- Policy dependency
- Sector volatility
Conclusion
The last two years have been exceptional for certain thematic, sectoral, and mid-cap mutual funds. While these returns are impressive, it is important to remember that high-performing funds often come with higher risks. Investors should assess their risk appetite, investment horizon, and financial goals before committing capital to such schemes.
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