Midcap Funds Outperform Smallcaps in Long-Term Investments

Mutual funds focusing on midcap stocks have consistently delivered stronger returns for investors utilizing systematic investment plans (SIPs), surpassing the performance of smallcap funds over extended periods.

Study Highlights Midcap Superiority

According to a study by Equirus Credence Family Office, the Nifty Midcap 150 Total Returns Index (TRI) achieved an average return of 17.3% over 10-year rolling periods, compared to 15.1% for the Nifty Smallcap 250 TRI. This trend continued over 15 years, with midcaps delivering 16.9% against smallcaps' 14.1%.

Why Midcaps?

"Midcap stocks have outperformed smallcaps over the long term, offering better risk-adjusted returns, stronger business fundamentals, and higher survivability," said Chanchal Agarwal, CIO at Equirus Credence Family Office.

Midcap companies, ranked 101-250 by market capitalization, provide a more concentrated investment space compared to the broader and more diverse smallcap segment.

Stability and Performance

Midcap stocks have demonstrated more stability than smallcaps, with significantly lower drawdowns. The Nifty Midcap 150 TRI showed minimum five- and ten-year rolling monthly SIP returns of -8.2% and 6%, respectively, versus -21.2% and 0.2% for smallcaps.

Currently, midcap stocks are trading at a premium, with the Nifty Midcap 150's PE ratio at 35.21, higher than both the Nifty 50’s 22.29 and the Nifty Smallcap 250’s 33.82.