Morningstar India’s 2026 study reveals a stark contrast between short‑term outperformance and long‑term consistency in India’s active equity funds.
The analysis, covering data up to June 30 2026, shows that 50‑60% of assets in active funds outpaced passive peers over one‑ and three‑year windows, but that figure plummets to about 40% when the horizon stretches to ten years.
Large‑cap managers dominated the recent gains, with roughly 85% of assets beating passive benchmarks over a year and 50% over five years, yet their edge erodes to just a quarter over a decade. Small‑cap funds, by contrast, delivered a stronger five‑year track record, with 60% of assets outpacing passive counterparts, while mid‑cap funds struggled beyond mid‑term horizons. Kaustubh Belapurkar, director and manager of research at Morningstar India, said the narrowing alpha pool signals a need for more selective management.
Across the pond, active large‑cap funds in the U.S. typically capture only 5‑10% of assets that beat indexes, and even small‑cap managers rarely exceed 30% success rates, underscoring India’s comparatively higher alpha potential—though the long‑term gap is narrowing.
The findings point to a shrinking pool of truly outperforming managers, prompting investors to weigh fee structures and track record persistence more carefully. Fund houses may need to tighten discretionary exposure or pivot toward niche strategies as the decade‑long alpha pool contracts. Analysts will be watching the next quarterly filings for signs of strategic realignment and fee compression.