Small-cap mutual funds emerged as the top-performing equity mutual fund category across multiple investment horizons, while mid-cap funds delivered the highest returns over the three-year period, according to ICRA Analytics data cited by CNBC-TV18.
The performance data, based on MFI 360 Explorer as of June 30, 2026, also highlighted continued investor participation in mid-cap and small-cap funds despite elevated market valuations.
According to ICRA Analytics, small-cap mutual funds delivered the highest returns across the 1-year, 5-year, 7-year and 10-year investment periods among major equity mutual fund categories.
Over the 5-year period, small-cap funds generated a 17.06% CAGR, followed by mid-cap funds at 16.33% and multi-cap funds at 14.50%.
The gap widened over longer periods, with small-cap funds delivering a 21.41% CAGR over 7 years, compared with 19.09% for mid-cap funds. On a 10-year basis, small-cap funds returned 16.94% CAGR, while mid-cap funds generated 16.02% CAGR.
Over a 3-year period, mid-cap mutual funds delivered the highest CAGR of 18.76%, outperforming small-cap funds (17.68%) and sectoral funds (16.72%), according to the report.
In the shorter term, small-cap funds also led the 1-year performance with an absolute return of 6.05%, followed by mid-cap funds at 4.02%. Several categories, including large-cap, flexi-cap, ELSS and dividend yield funds, posted negative returns over the same period.
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| Category | 5-Year CAGR | 7-Year CAGR |
|---|---|---|
| Small Cap | 17.06% | 21.41% |
| Mid Cap | 16.33% | 19.09% |
| Sectoral | 13.96% | 16.34% |
| Multi Cap | 14.50% | 16.53% |
| Large & Mid Cap | 13.89% | 15.61% |
| Value | 14.08% | 15.31% |
| Contra | 14.99% | 16.96% |
| Thematic | 13.86% | 15.80% |
| Dividend Yield | 14.14% | 16.17% |
| Flexi Cap | 11.90% | 13.84% |
| Focused | 11.95% | 13.42% |
| ELSS | 11.97% | 13.88% |
| Large Cap | 10.22% | 11.84% |
The report highlighted sustained investor participation in both categories.
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 also remained strong, with both mid-cap and small-cap funds attracting around ₹4,777 crore each per month, supported by continued systematic investment plan (SIP) investments.
Small-cap mutual funds led returns across the most long-term periods, while mid-cap funds topped the 3-year chart, according to ICRA Analytics. The report also cautioned that elevated valuations could increase market volatility.
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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
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Published on: Jul 21, 2026, 3:50 PM IST
Rakesh Deshmukh
Rakesh Deshmukh is a financial content specialist with around 3 years of experience writing impactful content across equities, mutual funds, IPOs, and personal finance. At Angel One, he decodes real-time market trends and breaking news, helping investors and traders stay updated. He also helps investors make informed decisions by simplifying market fundamentals and technical analysis. He holds a bachelor’s degree in commerce.
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