In FY26, the Indian equity market took a breather from the sustained rally seen in the past few years.
This was as a result of the many shocks it endured such as the Indo-Pak conflict, muted corporate earnings growth, valuation concerns, foreign investor outflows, the AI threat to the IT sector, and the more recent West Asia war.
Amid this, mid cap funds have turned out to be surprise winners.
The mid cap fund category outperformed large cap funds and small cap funds in FY26, highlighting its sweet spot of carrying high returns potential compared to large cap funds at a relatively lower risk compared to small cap funds.
Mid cap mutual funds have a mandate to invest a minimum of 65% of their total assets in equity and equity-related instruments of mid-cap companies. Mid-cap companies are typically defined as companies ranking from 101st to 250th in terms of full market capitalisation.
Mid-cap stocks offer an attractive investment proposition as they carry allocation to stocks from emerging and niche segments that have the potential to become bluechips of tomorrow.
This gives mid cap funds high upside potential and the ability to outperform over the long run.
In this editorial, we look at the 4 top performing mid cap funds based on 5-year rolling returns.
#1 Motilal Oswal Midcap Fund
Incepted in February 2014, Motilal Oswal Midcap Fund aims to create alpha through a concentrated portfolio of up to 35 mid-sized companies. The fund aims to invest in quality businesses with reasonable long-term growth prospects and available at a fair price.
Since its launch, it has established a credible track record having outperformed the benchmark and the category average on multiple occasions. The fund is benchmark agnostic and the stock/sector level allocation are decided as per the fund mangers’ view of the market.
In the last 5 years, Motilal Oswal Midcap Fund generated returns at a CAGR of 33% on a rolling return basis compared to 27.6% generated by the Nifty Midcap 150 – TRI index.
However, the fund has registered higher volatility and has trailed the benchmark and the category average on risk-adjusted returns.
As of 28 February 2026, it held just 25 stocks in its portfolio. The fund held its top exposure in One97 Communications, Kalyan Jewellers India, Eternal, KEI Industries, and Persistent Systems accounting for 59% of its total assets.
Its top sector allocation includes Infotech and Finance that collectively form 44% of its assets.
Motilal Oswal Midcap Fund follows an agile investment strategy, holding many of its stocks with a short to medium-term view to capitalise on the various opportunities available in the market.
In the last one year, it maintained an exposure of around 65-75% in midcaps, along with 7-22% in largecaps, with no exposure in smallcaps.
#2 Edelweiss Mid Cap Fund
Launched in December 2007, Edelweiss Mid Cap Fund aims to identify strong and quality businesses with good earnings growth potential, profitable products and services, and run by good management.
It adopts a bottom-up approach to pick stocks having the potential to compound wealth over the long term.
The fund has consistently registered above-average growth over the long-term time frames through its focus on building a well-diversified portfolio of strong growth companies.
Its performance is particularly good during market rallies when it has regularly maintained a decent lead over the category average. It also stands strong during bearish phases.
In the last 5 years, Edelweiss Mid Cap Fund generated returns at a CAGR of 30.2% on a rolling return basis compared to 27.6% generated by the Nifty Midcap 150 – TRI index.
Moreover, the fund has registered reasonable risk-adjusted returns.
As of 28 February 2026, Edelweiss Mid Cap Fund held 87 stocks in its portfolio with Marico, Multi Commodity Exchange of India, The Federal Bank, Fortis Healthcare, and Indian Bank among its top holdings.
Sector wise, the fund holds higher exposure in finance, banks, and auto & ancillaries. It had a moderate turnover ratio of 40-50% in the last one year.
Over the last one year, the fund’s combined exposure towards mid and small-caps stood in the range of about 75-85% of its assets, while it held an exposure of around 10-20% in large caps.
#3 HDFC Mid Cap Fund
Launched in June 2007, HDFC Mid Cap Fund has earned a reputation among investors for its strong historical performance. Its immense corpus size of over Rs 942 bn is a testament to its popularity.
Over the years, the fund has solidified its position in the mid cap fund category by consistently delivering above-average returns and maintaining a top-quartile rank across various market cycles.
The fund’s success is largely attributed to the expertise of its fund manager, Chirag Setalvad, who is known for selecting high conviction mid-cap and small-cap stocks.
In the last 5 years, HDFC Mid Cap Fund generated returns at a CAGR of 29.6% on a rolling return basis compared to 27.6% generated by the Nifty Midcap 150 – TRI index. It has displayed lower volatility and has outscored the benchmark and the category average on risk-adjusted returns.
The fund currently holds 78 stocks and it has limited the exposure in single stock to 5%. Max Financial Services, The Federal Bank, AU Small Finance Bank, Indian Bank, and Balkrishna Industries, currently figure among its top holdings. Its top sectors are bank, auto & ancillaries, and healthcare.
It has a low turnover ratio of around 10-20%, which reflects the strong long-term conviction the fund manager has in the stocks.
Over the last one year the fund’s combined exposure towards mid and smallcaps stood at about 85% of its assets, with 5-10% in largecaps.
#4 Nippon India Growth Mid Cap Fund
Launched in October 1995, Nippon India Growth Mid Cap Fund was originally launched as a multi-cap oriented fund but was recategorised in 2018. Under its current investment mandate, the fund has performed exceptionally well and turned out to be one of the category outperformers.
Nippon India Growth Mid Cap Fund employs the ‘Growth at Reasonable Price’ strategy to identify high-potential stocks. The fund avoids investing in momentum-driven bets, instead focusing on quality stocks available at reasonable valuations and holding them with a long-term perspective.
In the last 5 years, Nippon India Growth Mid Cap Fund generated returns at a CAGR of 29.5% on a rolling return basis compared to 27.6% generated by the Nifty Midcap 150 – TRI index.
The fund’s volatility is nearly in line with the benchmark and the category average whereas it outscores them on risk-adjusted returns.
As of 28 February 2026, the fund held 99 stocks in its portfolio with the top 10 stocks accounting for about 25% of its assets. Notably, the fund has restricted exposure in each stock to around 3%.
BSE, Fortis Healthcare, The Federal Bank, Voltas, and AU Small Finance Bank find place among the fund’s top holding.
It holds most of its stocks with a long-term view with a low turnover of up to 15% in the last one year. Sector wise, the fund has invested predominantly in finance, auto & ancillaries, and healthcare.
In the last one-year Nippon India Growth Mid Cap Fund’s mid-cap allocation stood at about 65-70% of its assets, along with 18-21% in large-cap stocks and 9-13% in small-cap stocks.
| Scheme | 5 Yr (%) | SD Annualised | Sharpe | Sortino |
| Motilal Oswal Midcap Fund | 33.00 | 18.79 | 0.25 | 0.44 |
| Edelweiss Mid Cap Fund | 30.21 | 16.14 | 0.36 | 0.67 |
| HDFC Mid Cap Fund | 29.55 | 14.41 | 0.37 | 0.72 |
| Nippon India Growth Mid Cap Fund | 29.53 | 15.71 | 0.36 | 0.69 |
| Category Average | 25.78 | 15.66 | 0.29 | 0.55 |
| Nifty Midcap 150 – TRI | 27.55 | 15.95 | 0.30 | 0.57 |
Conclusion
Mid cap funds may continue to exhibit strong growth over the long run supported by India’s long-term structural growth.
However, in the near term, the segment may witness high volatility and some further corrections amid geopolitical tensions, rising crude prices, and slower growth forecast, among other factors.
Since the downside risk and volatility associated with mid-cap stocks tends to be high compared to large-cap stocks, investors need to carefully assess their suitability when considering mid cap funds and avoid going overboard with the investments.
Ideally, only those with the ability to tolerate market fluctuations and having a long-term investment horizon of at least 5-7 years should consider investing in mid cap funds.
Further, you will be better off opting for high-quality mid-cap funds that have demonstrated reasonable growth across diverse market phases and noteworthy risk-adjusted returns.
#Table Note: Data as of 30 March 2026
Rolling period returns are calculated using the Direct Plan-Growth option.
Returns over 1 year are compounded annually.
Standard Deviation indicates risk, while the Sharpe ratio and Sortino ratios measure risk-adjusted return.
They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
The funds listed are ranked solely based on 5-year rolling returns. The list of schemes is not exhaustive.
Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendations.
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