A Comparative Analysis of Returns from Direct Equity and Large-Cap Mutual Fund Investments in India: Evidence from 2020–2025

Abstract

India’s growing financial awareness and digital platforms have increased interest in direct equity and mutual funds. Direct equity offers high returns with high risk, while mutual funds provide diversified and safer investments. This study examines the comparative performance of direct equity and selected large-cap mutual fund investments in India during the period 2020–2025. The NIFTY 50 was used as a proxy for direct equity investment, while SBI Large Cap Direct Plan Growth, HDFC Large Cap Direct Fund, and ICICI Prudential Large Cap Fund Direct Plan Growth represented mutual fund investments. The study is based on secondary data collected from the National Stock Exchange (NSE), Association of Mutual Funds in India (AMFI), and Investing.com India using monthly return data. A quantitative and comparative research design was adopted, and descriptive statistics, One-Way ANOVA, and Sharpe Ratio analysis were applied using Microsoft Excel to evaluate return, risk, and risk-adjusted performance. The findings indicate that ICICI Prudential Large Cap Fund Direct Plan Growth generated the highest average monthly return (1.50%), followed by SBI Large Cap Direct Plan Growth and HDFC Large Cap Direct Fund (1.40%), while the NIFTY 50 recorded an average monthly return of 1.20%. The standard deviation values remained close to 5% for all investment avenues, indicating similar levels of volatility. The ANOVA results (F = 0.0451, p = 0.9873 > 0.05) reveal that the differences in mean returns are not statistically significant. The Sharpe Ratio analysis further indicates that ICICI Prudential Large Cap Fund recorded the highest Sharpe Ratio (0.22), followed by SBI Large Cap Fund (0.20), HDFC Large Cap Fund (0.19), and the NIFTY 50 (0.15), suggesting comparatively better risk-adjusted performance of mutual funds over direct equity investment. The study concludes that although direct equity and large-cap mutual funds delivered broadly similar performance during the study period, professionally managed mutual funds provided relatively more stable and efficient risk-adjusted returns. Therefore, investment decisions should depend on investors’ risk tolerance, financial objectives, and investment horizon.