1 week ago
Mid-cap Funds Overtake Large Caps as SIP Preferences Shift
Many people investing through monthly mutual fund plans are choosing mid-sized companies more than before.
Mid-cap funds became the biggest SIP category in March 2026.
Small-cap and sector-focused funds also became more popular.
These funds did well in recent years, which may have attracted investors.
However, good past performance does not guarantee good future returns.
Small and sector-focused funds can also carry higher risks.
Experts say investors should look at their whole portfolio, not just the number of funds they own.
They should spread investments across suitable categories and rebalance when needed.
New investors should choose investments based on their goals instead of copying what was popular in 2026.
Mid-cap funds became the largest SIP category in March 2026, replacing large-cap funds.
Small-cap, sectoral and thematic, and multi-cap funds gained SIP share between March 2021 and March 2026.
Mid-cap funds benefited from stronger recent returns, earnings growth and a broader investment universe.
Experts warned investors against chasing past performance and accumulating excessive mid- and small-cap exposure.
New investors were advised not to copy the 2026 category mix, but to align portfolios with their goals and asset allocation.
- Who
- SIP investors, along with experts Adil Chacko of Anand Rathi Wealth and Aditya Agarwal of Wealthy.in.
- What
- Mid-cap funds overtook large-cap funds as the largest SIP category, while several other equity categories gained share.
- Where
- The data concerns mutual fund SIP investing in India.
- When
- The comparison covers March 2021 to March 2026, with the category ranking reported for March 2026.
- Why
- Mid-cap funds benefited from stronger recent returns, earnings growth and a wider investment universe, while other categories gained share for reasons including performance, regulation and changing asset-allocation preferences.
Performance and diversification case
Risk and caution case
Mid-cap popularity
Performance and diversification case
Mid-cap funds benefited from stronger returns, wider investment opportunities and better earnings growth, making their increased SIP share understandable.
Risk and caution case
Investors should ensure mid-cap exposure reflects a long-term asset-allocation strategy rather than a pursuit of recent performance.
Small-cap investments
Performance and diversification case
Small-cap inflows rose and the Nifty Smallcap 250 delivered around 14.5% annualised returns over five years, supporting continued investor interest.
Risk and caution case
Small-cap valuations were elevated relative to their five-year median, and many newer investors may not have experienced a prolonged downturn.
Sectoral and thematic funds
Performance and diversification case
Strong past performance in areas such as defence, auto, PSU banks and infrastructure helped these funds gain SIP share.
Risk and caution case
Their low SIP penetration suggests much of the money may be lump-sum or NFO-timed investment made after themes have already risen; diversified funds may provide a better way to obtain sector exposure.
Hybrid-fund decline
Performance and diversification case
The disappearance of balanced hybrid and aggressive hybrid funds from the top 10 may indicate that investors are taking greater control of asset allocation.
Risk and caution case
Agarwal said the asset-allocation role may instead have shifted toward newer hybrid categories, particularly multi-asset funds, which received ₹0.7 lakh crore in FY26.
Key facts
- Data source
- AMFI-Crisil Factbook 2026
- Mid-cap performance
- The Nifty Midcap 150 delivered around 17% annualised returns over five years, compared with 9.1% for the Nifty 50.
- Small-cap share
- Small-cap funds’ SIP share rose from 8.3% in March 2021 to 12.1% in March 2026.
- Sectoral and thematic share
- Sectoral and thematic funds’ SIP share increased from 5.8% to 8.7% over the same period.
- Multi-cap share
- Multi-cap funds entered the top 10 SIP categories with a 4.1% share in March 2026.
- Small-cap valuation
- The Nifty Smallcap 250 traded at a P/E of around 34, which Agarwal said was 22% above its five-year median.
- Suggested small-cap limit
- Chacko suggested limiting small-cap exposure to 20%-25% of an equity portfolio.
Quotes
Aditya Agarwal
Co-Founder of Wealthy.in
“Hence, investors should ensure that such mid-cap exposure is driven by a long-term asset allocation strategy rather than simply chasing recent performance”
livemint.com
“confusing the number of funds with diversification, chasing past returns, underestimating overall mid- and small-cap exposure, and failing to rebalance”
livemint.com
Sources
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