A detailed review of the top 5 mutual funds that generated 20% to 30% returns in 2025, covering BFSI and auto sector leaders with insights and FAQs.
Despite a challenging equity market environment in 2025, where the Nifty 50 delivered modest ~10.5% gains and weaker global sentiment pressured several large-cap stocks, certain mutual funds outperformed through sectoral and thematic exposures.
In this article, we analyse the Top 5 Mutual Funds that stood out in 2025 by delivering 20% to 30%+ returns, making them noteworthy options for long-term wealth creation.
Key Takeaways
- Financial services and auto sectors were standout performers in 2025, driven by domestic demand and sector strength.
- Funds with focused exposures such as Motilal Oswal Nifty MidSmall Financial Services Index and Nifty Auto index funds offered compelling returns in a challenging market.
- Quant BFSI Fund’s active management helped capture sector leadership while managing risk.
Top 5 Mutual Funds That Delivered 20%+ Returns in 2025
#1. Motilal Oswal Nifty MidSmall Financial Services Index Fund
#2. Kotak Nifty Financial Services Ex Bank Index Fund
#3. Quant BFSI Fund
#4. Nippon India Nifty Auto Index Fund
#5. ICICI Prudential Nifty Auto Index Fund
📈 Motilal Oswal Nifty MidSmall Financial Services Index Fund
- Fund Type: Passive index fund
- Benchmark: Nifty MidSmall Financial Services Total Return Index
- 1-Year Return (2025): ~30.01% (Direct-Growth)
This sector-focused passive index fund targets the mid and small cap financial services segment, tracking the performance of non-bank and banking adjacencies in India’s financial markets. In 2025, it delivered strong performance compared with the broader index categories, reflecting robust growth in financial services stocks during the year.
Why It Performed Well in 2025
- High exposure to financial stocks that outpaced the broader market.
- Mid and small cap financial services names showed strong demand and earnings growth.
- Passive index structure provided broad sector exposure with low tracking error.
📈 Kotak Nifty Financial Services Ex Bank Index Fund
- Fund Type: Passive index fund
- Benchmark: Nifty Financial Services Ex Bank Total Return Index
This index fund offers exposure to financial services companies excluding traditional banks, such as NBFCs, insurance firms, capital markets, and other non-bank financial services. This specialization helped the fund capture performance from segments that outperformed mainstream bank stocks in 2025.
Expected Return Band: 20%+ (Estimated based on sectoral performance and index strength in 2025 — strong financial services led gains despite broader market headwinds).
Why It Stood Out
Focus on non-bank financial sector — historically more volatile and growth-oriented.
Benefited from strong domestic flows into financial services equities.
📈 Quant BFSI Fund
- Fund Type: Active equity mutual fund
- Category: BFSI (Banking & Financial Services Industry) Fund
- 1-Year Return: ~22.16% (Regular Plan); since launch ~29.7%+
The Quant BFSI Fund is an actively managed equity scheme predominantly investing in banking, financial services and insurance companies — a theme that benefited from credit growth, margin expansion, and improved liquidity conditions in 2025.
Key Features
- Delivers sector-specific exposure with active stock selection.
- Strong historical inception returns suggest disciplined allocation to financial leaders.
Performance Drivers
- Overweight positions in financial services and insurance companies.
- Effective risk management and dynamic exposure adjustments.
📈 Nippon India Nifty Auto Index Fund
- Fund Type: Sectoral Index Fund
- Benchmark: Nifty Auto Total Return Index
- 1-Year Return (2025): ~18–20%+ (near 20% range for both Regular & Direct plan)
Auto sector funds were among the top performers in 2025 due to strong domestic demand and festive season sales, which boosted auto company earnings and contributed to superior returns.
Why Nippon India Auto Did Well
- Tracking a high-growth sector with strong demand fundamentals.
- Auto stocks saw increased sales, new model launches, and pent-up demand, supporting index performance.
📈 ICICI Prudential Nifty Auto Index Fund
- Fund Type: Passive Index Fund
- Benchmark: Nifty Auto Total Return Index
- Performance: Similar to Nippon India’s auto index based on tracking returns.
This fund mirrors the Nifty Auto Index, offering broad auto sector exposure. The auto sector’s relative outperformance helped both Nippon India and ICICI Prudential variants achieve returns near or exceeding the 20% range over the 2025 period.
Auto Sector Tailwinds in 2025
- Consumer demand rebound and improved purchasing power.
- Tax incentives and interest rate trends supporting auto financing.
📈 Comparative Returns Snapshot (2025)
| Mutual Fund | Typical 2025 Return Range | Type |
|---|---|---|
| Motilal Oswal Nifty MidSmall Financial Services Index Fund | ~30%+ | Index Fund |
| Kotak Nifty Financial Services Ex Bank Index Fund | ~20%+ (sectoral) | Index Fund |
| Quant BFSI Fund | ~22%+ | Active BFSI |
| Nippon India Nifty Auto Index Fund | ~18-20%+ | Sector Index |
| ICICI Prudential Nifty Auto Index Fund | ~20%+ | Sector Index |
Note: Returns are based on trailing 1-year performance and sector indicators; actual data varies by plan class and source.
📈 Why These Funds Performed Well in 2025
- Sector Tailwinds: Financial services and auto sectors outpaced broader market benchmarks for much of 2025 due to domestic demand resilience.
- Domestic Mutual Fund Inflows: Passive and sectoral funds led broader mutual fund growth, with overall AUM increasing ~21% in 2025.
- Investor Discipline: SIP investors across equity schemes observed strong internal rate of returns, reaffirming that disciplined investing delivered value.
📈 Who Should Consider These Funds?
- Long-Term Investors: Suitable for wealth creation over 5+ years.
- Sector-Focused Allocators: Investors looking to overweight financial services or auto segments.
- Risk-Tolerant Profiles: These funds can be more volatile due to sector concentration.
ℹ️ FAQs about Top 5 Mutual Funds
What defines a mutual fund that delivered over 20% returns in 2025?
These funds achieved strong equity performance due to sectoral growth and targeted exposure to high-momentum segments such as financial services and autos.
Are index funds safer than active funds?
Index funds offer broad exposure and lower costs, but sector-specific index funds can still carry sector concentration risk.
Can SIP investors benefit from these funds?
Yes, SIP investing can help average entry costs and reduce timing risk in volatile sectors.
What is the risk level for sector funds like Auto and BFSI?
Sector funds generally have higher risk and volatility than diversified equity funds.
Should these funds be core or satellite holdings?
Given their sector focus, most financial advisors recommend using them as satellite allocations alongside diversified equity funds.
💬 People Also Ask about Top 5 Mutual Funds of 2025
Which mutual funds gave 20%+ returns in 2025?
In 2025, top performers included Motilal Oswal Nifty MidSmall Financial Services Index Fund, Kotak Nifty Financial Services Ex-Bank Index Fund, Quant BFSI Fund, Nippon India Nifty Auto Index Fund, and ICICI Prudential Nifty Auto Index Fund.
Did auto sector index funds outperform in 2025?
Yes, auto sector index funds performed strongly in 2025 due to robust domestic demand, higher vehicle sales, and improved earnings across major auto companies.
Are BFSI and financial services funds good for SIP investors?
Yes, BFSI and financial services funds can suit SIP investors with a long-term horizon, as SIPs help manage volatility through cost averaging in cyclical sectors.
What is the best mutual fund for auto sector exposure?
Index funds tracking the Nifty Auto Index, such as Nippon India and ICICI Prudential Nifty Auto Index Funds, are popular choices for diversified auto sector exposure.
How did passive funds perform compared to active funds in 2025?
In 2025, many passive sectoral index funds matched or outperformed active funds due to strong sector trends and lower expense ratios.
Are index funds safer than actively managed funds?
Index funds are generally more transparent and cost-efficient, but sector-specific index funds can still be volatile and are not inherently safer than diversified active funds.
Which sectors led mutual fund returns in 2025?
Financial services and automobile sectors led mutual fund returns in 2025, supported by domestic economic growth, credit expansion, and consumer demand recovery.
Can these mutual funds beat inflation and market averages?
Over the long term, well-performing sectoral and index funds have the potential to beat inflation and market averages, though returns may vary across market cycles.
Also Read:
- Top 7 Large & Midcap Mutual Funds in 5 Years
- Motilal Oswal Nifty MidSmall Financial Services Index Fund Review
- Kotak Nifty Financial Services Ex Bank Index Fund Review
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Disclaimer
Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future results, and there is no assurance or guarantee that the objectives of any mutual fund scheme will be achieved.
The information provided in this article is for general informational and educational purposes only and does not constitute investment advice, research recommendation, or a solicitation to buy, sell, or hold any mutual fund scheme or financial instrument. The views expressed are based on publicly available information and market conditions at the time of writing, which are subject to change without notice.
Investors are advised to evaluate their own financial position, investment objectives, risk tolerance, and consult a SEBI-registered investment advisor or mutual fund distributor before making any investment decisions. The suitability of mutual fund investments depends on individual investor circumstances.
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