Mid Cap SIPs Outperform Large Caps by 4 to 5% Annually

With investors seeking avenues for long-term wealth creation, financial analysts are pointing to another compelling opportunity: systematic investment plans (SIPs) in mid-cap mutual funds. A recent study showed that mid-cap funds, when invested via SIPs over a decade, delivered average annualised returns of 17.4%, significantly higher than returns from large-cap funds (around 13%) and small-cap funds (14.8%). 

Experts say that the mid-cap segment offers a sweet spot for investors with moderate risk appetite. These companies are typically beyond the startup phase but yet to be household names; they offer growth potential and market flexibility that large-cap companies may lack. “Midcaps offer access to unique industries and emerging leaders not yet represented in the large-cap universe,” said a senior investment head. 

The study highlighted that in 10-year scenarios: nearly 98% of mid-cap SIPs delivered above 10% annual returns; 95% exceeded 12%; and 79% surpassed 15%. By comparison, large-cap funds delivered returns above 15% only 15% of the time. 

Part of the appeal lies in the index-performance data: the Nifty Midcap 150 TRI has outperformed the Nifty 50 TRI by 4.7% annually over 10 years and 10.1% over 5 years. 

However, fund managers note that valuations in the mid-cap space have cooled somewhat the price-to-earnings (P/E) ratio for the Nifty Midcap 150 recently fell from 43.5× to 34.8× within a year. 

For investors, the takeaway is clear: if you can remain invested for 10 years, maintain discipline via SIPs, and handle moderate risk, mid-cap mutual funds may offer a meaningful edge. That said, diversification and periodic review remain important, and investors should make decisions aligned with their financial goals and risk tolerance.