Large-Cap, Mid-Cap or Small-Cap: Which Mutual Fund Category Delivered the Highest 7-Year CAGR?

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. 

Small-Cap Funds Lead Long-Term Returns 

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. 

Mid-Cap Funds Top the 3-Year Performance Chart 

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. 

Read More: NFO Alert: AlphaGrep Mutual Fund Launches Flexi Cap Fund

How Equity Mutual Fund Categories Performed Over 5 and 7 Years

Investor Interest in Mid and Small-Cap Funds Remains Strong 

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. 

Conclusion 

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.