Alpha: 335 of 443 equity funds beat their benchmark's risk

What alpha says

A fund's return has two parts: the share that comes from the market it invests in, and the rest. Alpha is the rest. We measure it as Jensen's alpha: take the fund's monthly returns and its benchmark's for the last 36 completed months to September 2026, work out how sensitively the fund moves with the benchmark (its beta), and ask how much return was left over once a 6.5% risk-free rate is allowed for. The figure is a percentage per year. Funds that track their benchmark poorly are left out, because beta is not meaningful for them.

The scoreboard

Dividend yield (8 of 9 positive) and contra (3 of 3) are left out of the table for size. In total, 335 of 443 funds, or 76%, are positive. Alpha is in percentage points a year.

• Multi cap is nearly unanimous. 23 of 24 positive, and the lowest alpha, -0.2, is barely below zero.
• Large cap's average is modest. 23 of 31 positive, but an average of 1.44 and a median of 1.16, with the highest at 7.8.
• ELSS has the widest range among the diversified categories. Its best fund is at 10.0 and its worst at -5.1.
• Sector funds range from -12.6 to 23.5. The category average of 3.78 is not a number any single sector fund should be expected to deliver.

The yardstick matters

Alpha is only as good as the benchmark it is measured against. In our data:

The yardstick can change the answer completely. Until 7 October 2026 we scored the 29 large & mid cap funds against the Nifty Midcap 150 TRI, an index with no large companies; on that basis only 13 were positive, with an average alpha of 0.08 and a beta of 0.85. Against the Nifty 500 TRI, which covers both halves of their mandate, 27 are positive, the average is 3.11 and the beta 1.00. In the same way, the sector and thematic funds are mostly measured against the Nifty 500 TRI (139 of the 157), a broad index that has little to do with a pharma or banking fund's portfolio. A fund's alpha against its own sector's index would look different.

Why alpha is not a ranking

One window. Thirty-six months is short, and the fall in the market this year affects every fund's alpha. Funds with cash or defensive stocks look better on a falling market, as our capture ratio post shows.

It does not include costs you pay on the way in or out. Direct plans already carry the lower expense ratio.

Alpha can be luck. With a spread of 15 points in ELSS alone, no one can say from three years whether a high number is skill.

Where to go from here

The guide to rolling vs trailing returns shows why a single window can mislead, and our Sharpe ratio post covers another way to weigh return against risk. Compare individual funds in the screener.