The case for a regular, actively managed fund rests on one promise. You pay an expert a higher fee, and the expert does better than a cheap fund that simply holds the market. The debate over active vs index funds comes down to whether that promise holds in India.
There is a scorecard that checks it every six months. It is published by S&P Dow Jones Indices, which runs no mutual fund of its own, and it is called SPIVA.
What SPIVA measures
SPIVA compares actively managed funds with their benchmark index over 1, 3, 5 and 10 years. An index is a basket that holds the market, makes no decisions and costs very little to track. If a fund does worse than its benchmark, the investor would have been better off owning the basket.
The latest numbers for India
These figures are from SPIVA India Year-End 2025, covering periods to 31 December 2025.
| Fund category | Underperformed over 5 years | Underperformed over 10 years |
|---|---|---|
| Large-cap funds | 84.4% | 76.3% |
| Mid- and small-cap funds | 46.0% | 79.0% |
| ELSS (tax-saving) funds | 58.5% | 82.9% |
Over ten years, roughly three out of four large-cap funds, and about four out of five mid- and small-cap and ELSS funds, did worse than their benchmark.
Active vs index funds: why the expert usually loses
There is no conspiracy here. Two plain forces are at work.
- The fee. An active regular plan can charge well over 1.5% a year. An index fund can charge under 0.2%. The manager has to beat the market by the difference just to draw level, every single year.
- The arithmetic of averages. Professionals are a large part of the market. Before costs, they are the market, on average. After costs, the average has to fall behind.
Some funds do beat the index for a while. The difficulty is knowing which ones in advance, and whether they will keep doing it.
Does this mean index funds solve everything?
Index funds fix the fee problem, and that matters a great deal. Our SIP fee calculator shows how much a lower fee is worth over thirty years.
They do not fix everything. An index fund still builds a corpus. It still pays you nothing until you sell units, and in retirement selling units in a falling market does lasting damage. A cheaper road to the same destination is still the same destination.
How to apply this
- List your funds and their benchmarks. Every factsheet names the benchmark.
- Compare over five and ten years, not one. Short periods are noise.
- Check the fee you pay for the chance of beating the index.
- Ask what the corpus is for. If the goal is monthly income after your Salary stops, read the withdrawal math before choosing any fund.
Cheaper is better than dearer. But neither one pays your bills on its own.
Frequently asked questions
Do active mutual funds beat the index in India?
Over ten years to December 2025, SPIVA found that 76.3% of Indian large-cap funds and 79.0% of mid- and small-cap funds did worse than their benchmark.
What is the SPIVA India scorecard?
A twice-yearly report by S&P Dow Jones Indices that compares actively managed Indian funds with their benchmark indices over several periods.
Are index funds better than active funds?
Over long periods most active funds have trailed their index, largely because of higher fees. Index funds are cheaper, but they still build a corpus that must be sold to provide income.
Why do most fund managers underperform?
Mainly costs. A higher fee must be recovered every year before the investor gains, and professionals as a group cannot beat the market average they largely make up.
Disclaimer: This article is for education only and is not financial advice. Please consult a certified financial expert before making investment decisions.
