Several mutual funds delivered exceptional returns in 2025, significantly outperforming the Nifty 50 Total Return Index benchmark..The Nifty 50 Total Return Index posted modest gains of around 2.6 percent during the first months of 2025..The defence sector funds dominated the outperformance list, with returns exceeding 19 percent, driven by increased government budget allocations..Financial services-focused funds delivered returns of 15 percent or more, benefiting from strong performance in the insurance and NBFC sectors..Around 54 percent of small-cap funds successfully outperformed their respective benchmarks during 2025, showing strong sector momentum..Nearly 64 percent of mid-cap mutual funds beat their benchmark indices over twelve months ending March 2025..Passive funds tracking specific themes like defence matched or exceeded active fund performance during strong sectoral rallies in 2025..HDFC Balanced Advantage Fund led its category with 20.3 percent annualized returns over five years through dynamic asset allocation..Strategic sector exposure and concentrated positioning in high-growth themes enabled select mutual funds to significantly outperform Nifty in 2025..Read more stories.Join our WhatsApp Channel to get the latest news, exclusives and videos on WhatsApp