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    Home»Mutual Funds»Investors move to mid-cap funds as small-cap volatility rises
    Mutual Funds

    Investors move to mid-cap funds as small-cap volatility rises

    February 19, 2026


    The Nifty Midcap 150 has outperformed large- and small-cap indices across multiple time frames, with several mid-cap funds delivering 23–27% three-year returns.

    The Nifty Midcap 150 has outperformed large- and small-cap indices across multiple time frames, with several mid-cap funds delivering 23–27% three-year returns.
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    Growing uncertainty notwithstanding, investors are increasingly shifting their bets from small-cap to mid-cap funds.

    The gross inflows into mid-cap funds rose by ₹1,139 crore in the last 12 months ended January, to ₹94,043 crore, compared to ₹92,904 crore logged in small-caps.

    After the recent meltdown in small-cap stocks, investors have shifted their focus to mid-cap mutual fund schemes. With strong inflows and better performance, the assets under management of mid-cap funds have increased nearly 2.5 times to ₹4.61 lakh crore in December 2025, up from ₹1.85 lakh crore in December 2022.

    Performance edge

    The Nifty Midcap 150 has outperformed both the Nifty 100 and the Nifty Smallcap 250 indices across one-, three-, five-, and seven-year time frames by fair margins.

    Interestingly, most mid-cap mutual funds have beaten their benchmark indices. HDFC Mid-cap and Mahindra Manulife Mid Cap funds have delivered 27 per cent over three years, while mid-cap funds from Motilal Oswal MF and Kotak Mahindra MF delivered returns of 25 per cent and 23 per cent in the same period.

    Expert view

    Krishna Patwari, Founder & MD, Wealth Wisdom India, said mid-cap funds have attracted strong inflows over the past few years due to their superior return potential.

    Mid-caps have delivered over the long term. For instance, an eight-year SIP in Mahindra Manulife Mid Cap Fund generated an extended internal rate of return of 22 per cent, outperforming its benchmark, with consistent rolling returns and relatively better risk-adjusted performance, he said.

    Data from Franklin Templeton also shows steady SIP participation despite volatility, reinforcing investor commitment to long-term wealth creation. Investors must see this as a portfolio recalibration rather than excessive risk-taking. Mid-caps remain attractive for growth, but allocation discipline and a structured SIP approach are key, he added.

    Shantanu Awasthi, Co-founder and Chief Executive Officer, Mavenark Wealth, said the flow into mid-cap funds has increased as both mid-cap indices and mutual fund schemes have performed well over the last six months, and people with a higher risk appetite are chasing higher returns.

    On the other hand, volatile small-cap stocks have been beaten down, and money has moved out of small-cap mutual fund schemes, he added.

    Published on February 19, 2026



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