Over the five years to 28 September 2026, the five largest focused funds returned between 3.4% and 17.3% a year, against 6.37% for the Nifty 50 TRI, and four of the five beat it. With 30 stocks or fewer, which fund you pick matters far more than in a diversified fund. Most diversified equity funds own 50 to 100 stocks. A focused fund is limited to 30. The idea is simple: if the manager's best ideas are diluted less, good calls count for more. So do bad ones. This guide explains the category, what SEBI requires, how to judge a concentrated fund, and how five of the largest focused funds compare on data to 28 September 2026. It compares funds; it does not recommend any of them.
What SEBI Requires of a Focused Fund
Under SEBI's categorisation circular of 26 February 2026:
- A focused fund can hold a maximum of 30 stocks.
- At least 80% of total assets must be in equity and equity-related instruments. Before February 2026 the floor was 65%.
- The fund must say where it intends to focus by market size: multi cap, large cap, mid cap or small cap. Two focused funds can therefore be quite different products.
- The rest of the portfolio can be in other equity, money market instruments, gold and silver instruments permitted by SEBI, or InvITs.
The circular also requires scheme names to match the category name, and gave existing schemes six months to comply. That is why most of these funds have new names: "HDFC Focused 30 Fund" is now HDFC Focused Fund, "ICICI Prudential Focused Equity Fund" is ICICI Prudential Focused Fund, and the Kotak and SBI "Focused Equity" funds are now Kotak Focused Fund and SBI Focused Fund.
Why Concentration Matters: A Simple Illustration
Illustrative arithmetic, not data on any fund. Suppose a fund spreads its money equally across 25 stocks, so each is 4% of the portfolio. If one stock doubles, it adds 4 percentage points to the fund's return (4% × 100%). If one stock halves, it takes away 2 points (4% × 50%). In a fund spread equally across 100 stocks, each is 1%, so the same moves add 1 point or take away 0.5 points.
That is the whole trade-off. A focused fund's good and bad decisions show up four times as strongly in this example. It also means a focused fund can look very different from its benchmark for long stretches, in either direction.
Five Focused Funds Compared
| Fund (current name) | 1Y | 3Y | 5Y CAGR | 10Y | TER (BER) | AUM | Stocks |
|---|---|---|---|---|---|---|---|
| HDFC Focused Fund | −2.16% | 14.71% | 17.32% (19.37%) | 14.37% | 0.82% (0.62%) | ₹28,200.67 Cr | 29 |
| ICICI Prudential Focused Fund | 0.19% | 16.08% | 14.42% (16.41%) | 14.82% | 1.14% (0.57%) | ₹17,948.80 Cr | About 30 |
| Kotak Focused Fund | 5.33% | 14.04% | 11.56% (13.38%) | n/a (launched Jul 2019) | 0.745% (0.51%) | ₹4,548.87 Cr | 29 |
| SBI Focused Fund | 9.95% | 14.51% | 11.06% (12.75%) | 14.81% | 0.83% (0.58%) | ₹51,247.73 Cr | 26 |
| Axis Focused Fund | 0.30% | 9.19% | 3.44% (5.53%) | 11.64% | 1.05% (0.76%) | ₹11,424.21 Cr | 28 |
Direct plan, growth option. Returns are point-to-point from AMFI NAVs to 28 September 2026; 3-, 5- and 10-year figures are annualised. The 5-year figure in brackets is to 31 August 2026. TER is the total expense ratio of the direct plan (22–27 September 2026); BER, in brackets, is SEBI's base expense ratio, which excludes statutory levies. AUM and stock counts as of 31 August 2026; SBI's count includes foreign shares.
Benchmarks over the same period: the Nifty 50 TRI returned 6.37% a year over five years and 11.38% over ten; the Nifty 500 TRI returned 9.14% over five years.
What the table shows
- The spread is wide. Five-year returns range from 3.4% to 17.3% a year. That gap is the defining feature of the category: with 30 stocks or fewer, which fund you pick matters much more than in an index fund.
- Four of the five beat the Nifty 50 TRI over five years. Axis Focused Fund did not.
- Rankings change with the period. SBI was the best of the five over one year and fourth over five. ICICI led over three and ten years, HDFC over five. A single period tells you little.
- Dates move the numbers. The 5-year return to 31 August was 1.7 to 2.1 points higher for every fund than to 28 September. Always compare funds over identical dates.
To check any focused fund over your own choice of dates, use the mutual fund analyser, which works from AMFI NAVs. If you invested through a SIP, your real return is the XIRR of your cash flows, which the XIRR calculator works out.
Fund Managers: The Biggest Single Risk
With so few stocks, a focused fund is essentially the manager's judgement. Managers as of September 2026:
- HDFC Focused Fund: Amit Ganatra (since 31 January 2026) and Dhruv Muchhal. Roshi Jain, who ran the fund through most of the period in the table, left in November 2025.
- ICICI Prudential Focused Fund: Vaibhav Dusad and Sharmila D'Silva.
- Kotak Focused Fund: Shibani Sircar Kurian.
- SBI Focused Fund: R. Srinivasan and Pradeep Kesavan.
- Axis Focused Fund: Sachin Relekar and Krishnaa Narayan.
The HDFC change is a live example of why this matters. The fund's five-year record was built largely by a manager who is no longer there. That does not mean the new team will do better or worse; it means the past record says less about the future than it seems.
How to Judge a Focused Fund
- Several return periods, same end date. Look at 3, 5 and 10 years against the Nifty 50 TRI or Nifty 500 TRI. A fund that has led over one period only may have caught one theme.
- Manager tenure. Check who ran the fund over the period you are looking at. A recent change resets much of the track record.
- Total expense ratio of the direct plan. Use total TER, not the base figure. If you use a cut-off such as 0.90%, only HDFC, Kotak and SBI pass on September 2026 data. Our guide to direct vs regular plans shows what the plan choice adds.
- Market-cap focus. Each fund states whether it focuses on large, mid, small or multi cap. A large-cap focused fund and a multi-cap focused fund carry different risks.
- Top-ten weight and overlap. In a 30-stock fund, the top ten can be half the portfolio. Check whether those names already dominate your other funds; our note on portfolio overlap shows how.
- Size. A very large focused fund has to put a lot of money into each of only 30 stocks, which is easier in large companies than in small ones.
The broader checklist is in our guide on how to choose a mutual fund.
Where Focused Funds Tend to Fit
Because results depend so much on one manager's calls, focused funds are often used as a smaller "satellite" holding next to a diversified core such as a flexi-cap or index fund. Our comparison of flexi-cap funds covers the diversified alternative. Concentrated portfolios can fall further than diversified ones in a bad year, and a fund can lag for several years in a row, as the Axis numbers show. If you would be tempted to sell after two weak years, a concentrated fund is hard to hold.
A longer holding period gives a manager's approach time to play out, but it does not guarantee a good result. The SIP calculator can show what different return assumptions mean for a monthly investment over your horizon.
How Focused Funds Are Taxed (Tax Year 2026-27)
Focused funds hold at least 80% in equity and almost all of that in Indian listed shares, so they are taxed as equity-oriented funds:
- Held more than 12 months: 12.5% on long-term gains above ₹1.25 lakh a year (one limit across all your equity funds and shares).
- Held 12 months or less: 20%.
- IDCW payouts: taxed at your slab rate, with 10% TDS if they exceed ₹10,000 a year from the fund.
Add 4% cess and any surcharge. Switching from one focused fund to another is a sale, so it can trigger tax. See our mutual fund tax guide for the details.
