Mid-Cap and Small-Cap Mutual Funds Deliver Strong 5-Year Returns, AUM Sees Sharp Growth
New Delhi, March 24: Mid-cap and small-cap mutual funds continue to attract strong investor interest, emerging as preferred categories driven by robust returns, rising assets under management, and sustained inflows over the past five years.Strong CAGR Growth Boosts AUM Expansion
According to a report by ICRA Analytics, citing data from the Association of Mutual Funds in India, both mid-cap and small-cap funds have recorded significant compounded annual growth rates between February 2021 and February 2026.Mid-cap funds delivered a five-year CAGR of 32.41 per cent, with AUM surging from Rs 1.13 lakh crore to Rs 4.62 lakh crore. Small-cap funds outperformed, posting a higher CAGR of 39.93 per cent, as AUM climbed from Rs 67,764 crore to Rs 3.64 lakh crore during the same period.
Investor Flows Turn Positive
Investor sentiment towards these categories has also strengthened notably. Mid-cap funds reported net inflows of Rs 4,003 crore in February 2026, compared to a marginal outflow of Rs 99 crore in February 2021.Similarly, small-cap funds witnessed inflows of Rs 3,881 crore, reversing outflows of Rs 452 crore recorded five years earlier. This shift highlights renewed investor confidence and continued participation in higher-growth equity segments.
Near-Term Volatility Remains a Concern
The report noted that short-term performance could remain volatile due to global uncertainties and foreign fund outflows from Indian equity markets. Geopolitical tensions are also expected to impact investor sentiment, leading to a cautious approach towards mid-cap and small-cap investments in the near term.Long-Term Wealth Creation Potential Intact
Despite near-term risks, long-term performance across several schemes remains strong. Many funds in these categories have delivered over 20 per cent compounded annual returns over five years, underlining their potential for sustained wealth creation.SIP Inflows Reflect Continued Retail Confidence
Retail participation in mutual funds remains firm, supported by steady growth in Systematic Investment Plan contributions. SIP inflows rose 14.79 per cent year-on-year to Rs 29,845 crore in February 2026, up from Rs 25,999 crore in the same month last year.The steady rise in SIP investments signals continued confidence among retail investors, even as market conditions remain dynamic.
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