Evaluating the returns of a mutual fund is vital to assess its overall performance. Aside from this, there are other factors that incentivise investors to invest in a fund scheme. These include reputation of a mutual fund house, past performance of fund managers, category of fund i.e., active or passive, among others.
Here we shed light on the performance of mutual fund schemes in the categories of small cap and mid-caps, particularly for the past three years.
But at the outset, we explain what exactly are small and mid-cap funds:
Small Vs mid cap funds
According to the SEBI guidelines on Categorization and Rationalization of schemes, mid cap funds are mutual funds which have at least 65 percent investment in mid cap stocks, and small cap funds have a minimum investment of 65 percent in the small cap stocks.
Small-cap stocks are the stocks of companies which have a market capitalisation of lower than ₹5,000 crore, whereas midcap stocks belong to companies that have a market cap of anywhere between ₹5,000 crore and ₹20,000 crore.
Midcap stocks are less volatile and riskier in comparison to large-cap stocks. Small Caps are riskier than mid cap stocks since they are puny firms which remain unnoticed until a big event or trigger takes place.
Small cap stocks have a higher growth potential since the risk is also higher. Since they have low stock prices, what would be a small bump in stock price for say a large-cap or midcap will be a surge for a small cap stock which in turn will give better returns.
| Market capitalisation | 3-year returns (%) | 5-year-returns (%) |
| Small-cap | 30.84 | 14.23 |
| Mid-cap | 23.95 | 12.96 |
| Large-cap | 13.97 | 10.24 |
(Source: Mutualfundindia.com)
Three-year returns: As we can see in the table above, small cap funds delivered 30.84 percent return in the past three years and mid cap funds gave a lower return of 23.95 percent return during this time period. The difference narrows down if we see the returns given in the past five years.
As the table shows, the five-year returns of small cap funds stood at 14.23 percent and those of mid cap funds were 12.96 percent.
| Mid cap funds | 3-year-returns |
| PGIM India Midcap Opportunities Fund | 37.44 |
| Quant Mid Cap Fund | 35.78 |
| SBI Magnum Midcap Fund | 29.07 |
| Edelweiss Mid Cap Fund | 26.28 |
| Small cap funds | 3-year-returns |
| Quant Small Cap Fund | 50.21 |
| Bank of India Small Cap Fund | 38.78 |
| Canara Robeco Small Cap Fund | 37.93 |
(Source: AMFI; regular returns data as on Sept 30,2022)
As we can see in the table above, the highest returns given by mid cap funds were in the range of 26-37 percent. PGIM India Midcap Opportunities Fund gave a three-year return of 37.44 percent. Quant mid cap fund gave a return of 35.78 percent and SBI Magnum Midcap fund delivered a return of 29.07 percent.
At the same time, the top-performing small cap funds were ahead of their mid-cap counterparts. For instance, Quant Small Cap Fund gave a return of 50.21 percent, Bank of India Small Cap Fund gave a return of 38.78 percent and Canara Robeco Small Cap Fund gave a return of 37.93 percent.
However, regardless of high returns, it is recommended that retail investors must remain cautious while investing in small and mid-cap funds and carry out a thorough research and be prepared for volatility.
(Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.)
