Mutual fund investors generally associate equity investing with long-term wealth creation, but not every fund delivers positive returns over every period. Market cycles, sector-specific weakness and fund strategy can result in periods of negative returns, even for equity-oriented schemes. Based on the latest 3-year return data considered for this article, five mutual funds have delivered negative annualised returns. Interestingly, three of them are Nifty IT index funds, while the remaining two are from the FMCG and flexicap categories.
Review – Why This Nasdaq 100 Fund’s 54% Return Isn’t Real — And Could Soon Vanish
Why This Comparison Matters?
A negative 3-year CAGR can look alarming at first, but the number needs to be viewed in context. A sector fund can go through a weak cycle because of industry-specific factors, while a diversified fund may experience temporary underperformance due to its portfolio positioning.
Longer-term returns can also tell a different story. For example, ICICI Prudential FMCG Fund has delivered a negative 3-year return, but its 5-year and 10-year annualised returns are positive. This is why investors should look beyond a single return period before drawing conclusions about a mutual fund.
How did we filter these funds?
We considered all equity mutual funds – largecap funds, midcap funds, smallcap funds, flexicap funds, global funds and all thematic / sector mutual funds as part of this analysis. We have excluded ETFs from this list.
5 Mutual Funds That Lost Money in the Last 3 Years
The table below shows the mutual funds that delivered negative 3-year annualised returns based on the data provided.
| Fund Name | 3-Yr CAGR | 5-Yr CAGR | 10-Yr CAGR |
|---|---|---|---|
| ICICI Prudential FMCG Fund | -3.6% | 4.5% | 8.9% |
| Samco Flexi Cap Fund | -3.4% | — | — |
| Axis Nifty IT Index Fund | -2.8% | — | — |
| ICICI Prudential Nifty IT Index Fund | -2.8% | — | — |
| Bandhan Nifty IT Index Fund | -2.6% | — | — |
Returns are annualised CAGR for the Direct Plan as of 20-Sep-26. — indicates data fund not active and hence returns are not applicable.
The negative returns range from -2.6% to -3.6% a year over the 3-year period. ICICI Prudential FMCG Fund recorded the steepest decline at -3.6%, followed by Samco Flexi Cap Fund at -3.4%.
Category-Wise Breakdown
Nifty IT Index Funds – 3 Funds
Three of the five funds in the list track the Nifty IT index: Axis Nifty IT Index Fund, Bandhan Nifty IT Index Fund and ICICI Prudential Nifty IT Index Fund.
Their 3-year returns are remarkably close, ranging from -2.6% to -2.8%. This indicates that the negative performance is largely linked to the underlying IT sector rather than a major difference in fund management.
FMCG Fund – 1 Fund
ICICI Prudential FMCG Fund is the only FMCG-focused scheme in the list. It delivered a -3.6% 3-year CAGR, the lowest return among these five funds.
However, its longer-term numbers provide important context. The fund delivered 4.5% over 5 years and 8.9% over 10 years, showing that the recent three-year period has been considerably weaker than its longer track record.
Flexi Cap Fund – 1 Fund
Samco Flexi Cap Fund is the only diversified flexicap fund in the list. It delivered a -3.4% 3-year CAGR.
Unlike sector or index funds, flexicap funds can invest across large-cap, mid-cap and small-cap stocks. However, diversification does not eliminate the possibility of negative returns over a particular market cycle.
Explore – 5 Best Flexi Cap Mutual Funds to Invest in 2026 – Based on Rolling Returns
What’s Driving the Losses?
IT Sector Funds Under Pressure
Three out of the five funds are Nifty IT index funds, and all three have delivered almost identical negative returns.
Axis Nifty IT Index Fund and ICICI Prudential Nifty IT Index Fund delivered -2.8%, while Bandhan Nifty IT Index Fund delivered -2.6%. Since these schemes track the same underlying index, their performance is expected to remain closely aligned.
The data therefore points more towards weakness in the IT sector than fund-specific underperformance.
FMCG Fund Has a Weak 3-Year Window
ICICI Prudential FMCG Fund has delivered the steepest 3-year loss at -3.6%. However, its 5-year return of 4.5% and 10-year return of 8.9% show why looking at only the latest three-year period can give an incomplete picture.
A fund can go through a weak phase and still have a positive longer-term track record.
Flexi Cap Fund Faces Short-Term Weakness
Samco Flexi Cap Fund delivered a -3.4% 3-year CAGR despite having the flexibility to invest across different market-cap segments.
A flexicap mandate gives the fund manager flexibility in portfolio construction, but it does not guarantee positive returns over every period. Stock selection, sector allocation and market conditions can all influence short- and medium-term performance.
What Stands Out in This Data
The most noticeable feature is the close performance of the three Nifty IT index funds. Axis, Bandhan and ICICI Prudential have all delivered between -2.6% and -2.8% over three years, showing how closely index funds tracking the same benchmark can move.
ICICI Prudential FMCG Fund is another interesting case. It has the steepest 3-year loss at -3.6%, but its 5-year return of 4.5% and 10-year return of 8.9% are positive. This is a useful reminder that a weak three-year period does not automatically mean that a fund has been a poor long-term performer.
There is also limited long-term data for four of the five funds. Axis Nifty IT Index Fund, Bandhan Nifty IT Index Fund, ICICI Prudential Nifty IT Index Fund and Samco Flexi Cap Fund do not have 5-year or 10-year returns in the data considered here. Therefore, their longer-term consistency cannot be judged from this comparison alone.
Things to Check Before Reacting to Short-Term Losses
- Don’t judge a fund only by its 3-year CAGR. Check 5-year, 10-year and rolling returns wherever sufficient history is available.
- Understand the category. Sector and index funds such as Nifty IT funds can be more concentrated than diversified equity funds and may be affected heavily by sector-specific cycles.
- Look at the reason for the decline. If several funds tracking the same sector or index are showing similar returns, the weakness may be related to the underlying market rather than the individual fund. Check out my recent analysis on Why I Exited India’s Largest Flexi Cap Mutual Fund After 5 Years to gain some thoughts.
- Compare with the benchmark. For an index fund, compare its return with the underlying index and check whether the difference is reasonable after expenses and tracking error.
- Consider the investment horizon. Equity funds can experience extended periods of weak or negative returns, and a three-year window may not capture a complete market cycle.
Frequently Asked Questions
Should I exit a mutual fund with negative 3-year returns?
Not necessarily. A negative 3-year return should be examined along with the fund’s category, benchmark performance, portfolio, longer-term returns and the reason for the underperformance. The appropriate decision also depends on your investment objective and time horizon.
Why are IT mutual funds underperforming?
The three Nifty IT index funds in this comparison have delivered similar negative returns, indicating that their performance is closely linked to the underlying IT index. Sector-specific market conditions can therefore have a significant impact on their returns.
Is a negative 3-year return a red flag?
It can be a reason to investigate further, but it is not by itself sufficient to conclude that a fund is unsuitable. Investors should check whether the fund has underperformed its benchmark or peers, whether the weakness is sector-wide, and how the fund has performed over longer periods.
Disclaimer
This article is for informational and educational purposes only and is based on the mutual fund return data considered for this analysis. It does not constitute investment advice or a recommendation to buy, sell or hold any mutual fund scheme. Mutual fund investments are subject to market risks. Investors should review scheme-related documents and consider their investment objectives and risk profile before making investment decisions.
- 5 Mutual Funds That Lost Money in the Last 3 Years (as of Sep-2026) - September 21, 2026
- This Nasdaq 100 Fund’s 54% Return May Normalize Soon — Here’s Why - September 20, 2026
- GST Registration Cost & Timeline for Sole Proprietors Who Registered Online - September 19, 2026