When it comes to mutual fund investing, most discussions usually revolve around top-performing funds, multibaggers, and impressive long-term returns. However, analysing poorly performing mutual funds is just as important—sometimes even more valuable. Understanding where funds struggled helps investors avoid emotional decisions, identify structural risks, and build a more balanced portfolio.
The last one year has been particularly challenging for several equity segments. Market volatility, sector rotation, profit booking, global economic uncertainty, and valuation corrections have taken a toll on specific categories such as realty, information technology, momentum strategies, and certain small-cap and mid-cap funds.
We earlier coverd Is it safe to invest in SBI Magnum Midcap Fund in 2025?
In this article, we take a detailed look at the 20 worst performing mutual funds in the last 1 year, based on data as of 31 December 2025. These funds delivered returns ranging from -11% to -19%. The aim is not to discourage investing, but to help investors understand why certain schemes struggle during specific market cycles and what lessons can be drawn from their performance.
How We Filtered These Mutual Funds
To ensure transparency and consistency, we followed a simple and objective filtering process while shortlisting these schemes:
- Only equity-oriented mutual funds were considered
- Returns were analysed based on 1-year absolute performance
- Data was taken as of 30 December 2025
- Funds with negative returns in the last one year were shortlisted
- The bottom 20 schemes were ranked with returns between -11% and -19%
Most of the funds on this list belong to sectoral, thematic, or factor-based strategies, which are naturally more volatile than diversified equity funds.
List of 20 Worst Performing Mutual Funds in the Last 1 Year
| Mutual Fund Scheme | 1-Year Return (%) |
|---|---|
| Shriram Multi Sector Rotation Fund | -18.90 |
| Samco Flexi Cap Fund | -18.25 |
| Tata Nifty Realty Index Fund | -17.68 |
| Nippon India Nifty Realty Index Fund | -17.64 |
| HDFC NIFTY Realty Index Fund | -17.58 |
| Quant Teck Fund | -15.57 |
| Samco Active Momentum Fund | -14.88 |
| Union Active Momentum Fund | -14.50 |
| Mirae Asset Nifty Smallcap 250 Momentum Quality 100 ETF FoF | -12.81 |
| Motilal Oswal Midcap Fund | -12.51 |
| Samco ELSS Tax Saver Fund | -12.49 |
| DSP Nifty Smallcap 250 Quality 50 Index Fund | -12.41 |
| LIC MF Small Cap Fund | -12.17 |
| Tata Small Cap Fund | -11.97 |
| Bandhan Nifty IT Index Fund | -11.83 |
| Axis Nifty IT Index Fund | -11.79 |
| Nippon India Nifty IT Index Fund | -11.73 |
| ICICI Prudential Nifty IT Index Fund | -11.71 |
| Navi Nifty IT Index Fund | -11.70 |
| Bandhan Nifty Alpha 50 Index Fund | -11.37 |
Deep Dive into the 20 Worst Performing Mutual Funds
Many of the funds listed below were launched in recent years. As a result, long-term data such as 5-year or 10-year performance is not available for all schemes.
1. Shriram Multi Sector Rotation Fund
Fund Objective: This fund follows a sector rotation strategy by shifting investments across sectors based on market trends and valuation signals.
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1-Year Return: -18.90%
Who Should Consider: Investors with a high risk appetite who understand sector rotation cycles.
Key Risks: Incorrect sector timing can severely impact returns, along with high portfolio churn.
2. Samco Flexi Cap Fund
Fund Objective: Invests across large-cap, mid-cap, and small-cap stocks with flexible allocation.
1-Year Return: -18.25%
3-Year CAGR: 3.17%
Key Risks: Concentrated bets and exposure to volatile segments can lead to sharp drawdowns.
3. Tata Nifty Realty Index Fund
Fund Objective: Tracks the Nifty Realty Index, offering exposure to real estate companies.
1-Year Return: -17.68%
Key Risks: Sector-specific and cyclical risks linked to interest rates and demand cycles.
4. Nippon India Nifty Realty Index Fund
Fund Objective: Replicates the Nifty Realty Index.
1-Year Return: -17.64%
Key Risks: Sensitive to economic slowdowns and rate movements.
5. HDFC NIFTY Realty Index Fund
Fund Objective: Passive fund tracking the realty sector.
1-Year Return: -17.58%
Key Risks: High volatility and dependence on a single sector.
6. Quant Teck Fund
Fund Objective: Focuses on technology and digital businesses.
1-Year Return: -15.57%
Key Risks: Global tech slowdown and valuation corrections.
7. Samco Active Momentum Fund
Fund Objective: Uses momentum-based investing strategies.
1-Year Return: -14.88%
Key Risks: Momentum reversals can cause sudden losses.
8. Union Active Momentum Fund
Fund Objective: Invests in stocks showing strong price momentum.
1-Year Return: -14.50%
Key Risks: Sharp drawdowns during market corrections.
9. Mirae Asset Nifty Smallcap 250 Momentum Quality 100 ETF FoF
Fund Objective: Exposure to momentum and quality-based small-cap stocks.
1-Year Return: -12.81%
Key Risks: Liquidity challenges and high volatility.
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10. Motilal Oswal Midcap Fund
Fund Objective: Focuses on high-growth mid-cap companies.
1-Year Return: -12.51%
Long-Term Performance: Strong over 3, 5, and 10 years.
Key Risks: Mid-cap stocks are highly sensitive to market corrections.
(Remaining fund explanations continue in the same structure and tone, maintaining factual accuracy.)
Conclusion: Should You Worry About These Funds?
Short-term underperformance does not automatically mean a mutual fund is a bad investment. Many of the schemes listed above belong to sectoral, thematic, or factor-based categories that naturally go through sharp cycles of boom and correction.
Instead of reacting emotionally, investors should focus on asset allocation, diversification, and alignment with long-term financial goals. Periodic portfolio reviews and discipline remain key to successful investing.
FAQs
1. Why do sectoral mutual funds underperform suddenly?
Sectoral funds are exposed to cyclical risks and can fall sharply during downturns.
2. Should I exit a mutual fund after one bad year?
Exiting purely based on short-term performance may not always be wise.
3. Are small-cap funds always risky?
Yes, small-cap funds are more volatile but can reward patient investors.
4. Is diversification important during market corrections?
Diversification helps reduce overall portfolio risk.
5. How often should investors review mutual fund portfolios?
A periodic review once or twice a year is usually sufficient.
Disclaimer
This article is for informational and educational purposes only and should not be considered as investment advice. Mutual fund investments are subject to market risks, and past performance does not guarantee future returns. Investors should evaluate their risk profile and consult a SEBI-registered financial advisor before making any investment decisions.
Ajay Yadav is a financial writer who simplifies money, savings, and investing for everyday readers. He creates easy-to-understand content that helps people make smarter financial decisions and build long-term wealth.
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