Assets under management (AUM) of mid-cap funds grew at a compounded annual rate of 32.41% to ₹4.62 lakh crore as of February 2026, up sharply from ₹1.13 lakh crore in February 2021. Small-cap funds expanded even faster, with AUM rising at a 39.93% CAGR to ₹3.64 lakh crore from ₹67,764 crore over the same period, data from AMFI showed.
The growth has been steady across years, with mid-cap AUM nearly quadrupling and small-cap AUM increasing more than fivefold since 2021. Monthly flows also turned decisively positive. Mid-cap funds attracted net inflows of ₹4,003 crore in February 2026, while small-cap funds saw inflows of ₹3,881 crore—reversing net outflows recorded in February 2021.
Despite the strong long-term expansion, recent market conditions may test momentum. Ongoing geopolitical tensions and foreign portfolio outflows from Indian equities have introduced volatility, which could impact fund performance in the near term. This is likely to keep investor sentiment cautious, particularly in segments known for higher risk and sharper drawdowns.
Performance across leading schemes remains mixed in the short run but robust over longer horizons. Several top mid- and small-cap funds delivered annualised returns exceeding 20% over three- and five-year periods, even as some posted marginal declines over the past year, reflecting recent market corrections.
Meanwhile, retail participation continues to provide structural support to the mutual fund industry. Systematic investment plan (SIP) inflows rose nearly 14.79% year-on-year to ₹29,845 crore in February 2026, highlighting sustained investor interest despite volatility.
ICRA Analytics noted that disciplined investing through SIPs and a longer investment horizon could help investors navigate near-term fluctuations and benefit from compounding over time.
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First Published:Â Mar 24, 2026 7:55 AM IST