Smallcap funds ride MF retail wave, SIP assets up fivefold in five years

Smallcap funds have been the biggest beneficiaries of the systematic investment plan (SIP) wave in mutual funds (MFs) over the past five years. The category, along with midcap funds, has consistently attracted a sizeable share of SIP inflows and has seen a fivefold increase in assets linked to SIP accounts.

 

SIP assets in smallcap funds rose to ₹1.83 trillion in March 2026 from ₹35,489 crore in March 2021, an increase of nearly ₹1.48 trillion over five years. This was the highest increase among equity categories. Midcap funds recorded the second-highest growth, adding ₹1.45 trillion to their SIP AUM.

 

The data, released by the Association of Mutual Funds in India (Amfi) on Friday, indicates that two high-risk, high-return categories have been among the preferred choices of SIP investors. 

 

“There are two reasons behind the higher interest in these two categories. Historically, mid and smallcaps have delivered higher returns than largecap-oriented funds in longer timeframes. Hence, they are preferred funds of retail investors, who mostly invest through the SIP route,” said Rushabh Desai, founder, Rupee with Rushabh Investment Services.

 

Smallcap is the only equity category where SIP-linked assets account for more than half of total AUM.

 

“As of March 2026, SIP AUM (smallcap) accounted for 55 per cent of the smallcap category’s assets. Equity-linked savings scheme (ELSS), largecap, large and midcap and midcap funds have also seen steady growth in SIP penetration, with SIP AUM in respective categories contributing to 40-50 per cent of total category assets, reflecting their role as a core allocation route across market capitalisations,” Amfi stated in a report.

 

The rise in SIP assets has also increased the share of smallcap funds in overall SIP AUM. Its share rose to 12.1 per cent in March 2026 from 8.3 per cent in March 2021, making it the third-largest category by SIP AUM, behind midcap and flexicap funds. Sectoral and thematic funds also recorded a sharp increase in their share, from 5.8 per cent to 8.7 per cent.