HDFC Flexi Cap Fund is among the oldest and largest diversified equity schemes in India, but its current identity needs to be explained in the right context. Launched in January 1995 as HDFC Equity Fund, the scheme was categorised as a flexi-cap fund and renamed HDFC Flexi Cap Fund from January 29, 2021. Therefore, its three-decade record cannot be viewed entirely through the lens of the current flexi-cap mandate — the freedom to invest across large-, mid- and small-cap stocks without fixed allocation limits.

What is more relevant today is how the fund has evolved over the last five-seven years. It has become more willing to vary equity and market-cap exposure and rotate across stocks and sectors, while remaining predominantly large-cap. This has worked well. The scheme carries a 5-star bl.portfolio Star Track rating.

Importantly, its record has not come from loading up on smaller companies. With assets of nearly ₹1.14 lakh crore, however, scale is now an important variable in assessing what comes next. Here is a detailed fund review.

Strategy

The fund’s portfolio reveals a combination of long holding periods and meaningful rotation rather than either pure buy-and-hold investing or high-frequency churn.

Several stocks have persisted through essentially the fund’s 10-year history, including ICICI Bank, HDFC Bank, SBI, Infosys, Bank of Baroda, Larsen & Toubro, Cipla and Kalpataru Projects International, though their portfolio weights have changed substantially. SBI, for instance, has fallen from above 10 per cent at one stage to 4.16 per cent, while HDFC Bank has declined sharply from a peak of 9.83 per cent.

The current portfolio contains 78 stocks, but conviction is visible at the top. ICICI Bank accounts for 9.19 per cent, Axis Bank 6.19 per cent and HDFC Bank 5.71 per cent. Banks together constitute 28.6 per cent of assets against about 21.1 per cent for the flexi-cap category aggregate. Relative to the flexi-cap category, the fund is overweight automobiles, pharmaceuticals and biotechnology, healthcare services, construction, insurance and transport services, while it is underweight IT software.

The AMC describes its stock-selection approach as valuation-led rather than conventionally value-oriented, combining quality, growth, turnaround and valuation considerations. This helps explain why valuation discipline can coexist with a portfolio that does not necessarily look cheap on multiples from an absolute standpoint. As per ACE MF data, the fund portfolio is valued at about 35 times earnings and 7.3 times book value. Note, data available for peer set shows category P/E at 41.6 times and P/B at 7.8 times.

The fund’s active positioning does not rely on aggressive small-cap exposure. In August 2026, large-, mid- and small-cap allocations were 69.96 per cent, 14.90 per cent and 9.62 per cent, against category levels of 62.37 per cent, 15.69 per cent and 11.80 per cent. Yet the fund is moving down the market-cap curve. Large-caps are at their lowest weight in the available history, while mid-caps have jumped from 4.08 per cent in August 2025 to 14.90 per cent.

The fund has also used non-equity exposure tactically. Equity fell to 82.1 per cent in January 2026 before climbing back to over 94 per cent by August.

Performance

The strongest evidence in favour of HDFC Flexi Cap comes from rolling returns rather than isolated point-to-point numbers.

Over seven years of NAV history to October 1, 2026, its three-year rolling returns averaged 24.26 per cent against 18.19 per cent for the Nifty 500 TRI and 17.33 per cent for the flexi-cap category. The more telling figure is the minimum return: 13.47 per cent (fund) against 9.15 per cent (benchmark) and 8.47 per cent (category).

The five-year numbers strengthen this argument. HDFC Flexi Cap delivered a mean rolling return of 23.76 per cent and a minimum of 14.50 per cent. The corresponding flexi-cap category figures were 17.06 per cent and 8.58 per cent. The Nifty 500 TRI recorded a mean of 17.95 per cent and minimum of 8.64 per cent.

It is important to note that the HDFC Fund offering is not the leader on every parameter. Its consistency is notable despite the larger ₹1-lakh-crore plus asset base.

SIP numbers point in the same direction. A monthly SIP delivered XIRRs of 12.31 per cent over five years, 16.92 per cent over seven years and 15.59 per cent over 10 years. All three beat both the Nifty 500 TRI and flexi-cap category figures. Recent performance, however, is weaker. The one-year SIP return was minus 6.37 per cent, below the category’s minus 2.30 per cent, though better than the benchmark’s minus 8.92 per cent.

Risk-adjusted numbers help explain the longer-term outcome. Over three years, the fund’s beta stood at 0.85, while up capture was 96.99 and down capture only 68.84. Sharpe and Sortino ratios were among the strongest in the available peer-set. The fund has, in effect, participated in most of the market upside while absorbing materially less of the downside.

The fund has seen multiple manager transitions over its long history, with Prashant Jain having the longest tenure from 2003 to 2022. Since then, the management has changed more frequently, with Amit Ganatra taking charge from February 2026.

The base expense ratio of the fund’s direct plan at 57 basis points (1 bps = 0.01 per cent) is sharply lower than the category’s 72 bps average and is placed at the second-lowest quartile of the peer-set.

Takeaways

Three aspects stand out in our reading of this fund.

First, strong returns have not required unusually-high smaller-cap exposure. In fact, HDFC remains more large-cap oriented than the category even after its recent mid-cap increase.

Second, its large-cap orientation should not be mistaken for passivity. Meaningful stock and sector rotation over the past three years shows a willingness to take differentiated calls, while beta and downside capture ratio suggest this has not translated into excessive portfolio risk. Recent performance has nevertheless been ordinary, reminding investors that long-term consistency does not preclude shorter spells of underperformance.

Third, investors should not extrapolate past returns mechanically because both the fund and its scale have changed. Before recategorisation, equity exposure averaged 98.4 per cent; since February 2021, it has averaged 91.3 per cent with much wider swings, alongside more flexible market-cap positioning. AUM has, meanwhile, risen from about ₹25,500 crore in August 2021 to ₹1.14 lakh crore in August 2026, more than doubling since August 2024. Yet, size has not pushed HDFC Flexi Cap into the same portfolio constraints visible in Parag Parikh Flexi Cap. The HDFC fund still holds nearly 15 per cent in mid-caps and about 10 per cent in small-caps, compared with only about 3.4 per cent and 4.4 per cent, respectively, for the giant ₹1.47-lakh-crore Parag Parikh offering. This shows that large AUM does not automatically force a flexi-cap fund towards an overwhelmingly large-cap portfolio. But at HDFC’s size, even a 1 per cent position requires more than ₹1,100 crore. This makes liquidity, position sizing and execution increasingly important.

The key tests from here are whether the move towards mid-caps preserves that risk advantage, whether growing scale affects execution, and whether concentrated stock and sector calls continue to generate adequate active returns.

In a portfolio, HDFC Flexi Cap can sit in the core equity bucket, with its large-cap tilt and downside control giving it a relatively measured risk profile.

Published on October 10, 2026