Small-cap and mid-cap mutual fund categories emerged among the top performers across multiple investment horizons, according to performance data released by ICRA Analytics, even as the research highlighted continued investor interest in these segments despite elevated market valuations.
The data, based on MFI 360 Explorer as of June 30, 2026, shows that small-cap funds delivered the highest returns over one-, five-, seven- and 10-year periods, while mid-cap funds topped the three-year performance chart among major equity mutual fund categories.
How equity mutual fund categories performed
| Category | 5-year CAGR | 7-year CAGR | 10-year CAGR |
| Small Cap | 17.06% | 21.41% | 16.94% |
| Mid Cap | 16.33% | 19.09% | 16.02% |
| Sectoral | 13.96% | 16.34% | 14.31% |
| Multi Cap | 14.50% | 16.53% | 14.88% |
| Large & Mid Cap | 13.89% | 15.61% | 14.17% |
| Value | 14.08% | 15.31% | 13.76% |
| Contra | 14.99% | 16.96% | 15.36% |
| Thematic | 13.86% | 15.80% | 13.89% |
| Dividend Yield | 14.14% | 16.17% | 14.05% |
| Flexi Cap | 11.90% | 13.84% | 13.47% |
| Focused | 11.95% | 13.42% | 13.20% |
| ELSS | 11.97% | 13.88% | 13.40% |
| Large Cap | 10.22% | 11.84% | 11.74% |
(Source: MFI 360 Explorer, ICRA Analytics)
Over a three-year period, mid-cap funds generated a CAGR of 18.76%, followed by small-cap funds at 17.68% and sectoral funds at 16.72%.
Over five years, small-cap funds moved ahead with a CAGR of 17.06%, followed by mid-cap funds at 16.33% and multi-cap funds at 14.50%.
The gap widened further over longer investment horizons. Small-cap funds delivered a 21.41% CAGR over seven years, the highest among all equity categories, while mid-cap funds returned 19.09%. Contra funds ranked third with 16.96%.
On a 10-year basis, small-cap funds again led with a CAGR of 16.94%, narrowly ahead of mid-cap funds at 16.02%. Contra funds followed with 15.36%, while multi-cap funds returned 14.88% over the same period.
Short-term returns painted a different picture. Small-cap funds posted the highest one-year absolute return of 6.05%, followed by mid-cap funds at 4.02% and sectoral funds at 2.47%. In contrast, several categories, including large-cap, ELSS, contra, flexi-cap and dividend yield funds, recorded negative one-year returns.
The performance data comes alongside continued investor participation in mid-cap and small-cap schemes.
According to ICRA Analytics, mid-cap fund folios increased from 1.53 crore in June 2024 to 2.55 crore in June 2026, while small-cap fund folios rose from 2.03 crore to 2.87 crore during the same period. Together, the two categories account for more than 32% of all open-ended equity mutual fund folios.
Average monthly net inflows into both categories remained strong over the past year, with mid-cap and small-cap funds each attracting around ₹4,777 crore a month, reflecting sustained investor participation through systematic investment plans (SIPs).
ICRA Analytics said investors continue to remain invested in these categories despite elevated market valuations, supported by confidence in India’s long-term growth prospects and expectations that many mid- and small-cap companies could evolve into future large-cap businesses.
However, the research also cautioned that elevated valuations could result in periods of market correction, higher volatility and relatively lower future returns if corporate earnings fail to keep pace with market expectations. It said future performance is likely to depend on earnings growth rather than further expansion in valuations.