Mid, smallcap funds see strong inflows in 2026 despite market swings

According to Amfi data, the midcap and smallcap funds have witnessed a rise in inflows in 2026 so far despite heightened volatility in the markets.

The Indian equity market and the SMID segments have experienced a yo-yo ride in 2026 so far. At the start of the year, expectations were high for an earnings recovery, supported by several favourable factors. However, the West Asia conflict triggered a sharp correction, with benchmark indices falling as much as 12 per cent at one stage. The selloff was even steeper in the SMID space, where the midcap and smallcap indices declined between 12 and 14 per cent. 

 

When the recovery began, SMIDs bounced back stronger than the headline indices. The Nifty Midcap 100 index has recovered around 16 per cent from its March lows. The index touched a fresh high of 62,113.85 on May 8. Meanwhile, the Nifty Smallcap 100 index has rallied more than 20 per cent from its March lows. On a YTD basis, the Midcap index has surged 1.2 per cent, while the Smallcap index has moved higher by around 4.5 per cent. In comparison, the benchmark Nifty 50 index has declined over 8 per cent. 

 

 

While the indices have rebounded sharply, midcap and smallcap mutual funds have also attracted investors' interest. Analysts said that midcap and smallcap categories offer high returns often, but this comes with elevated volatility. Despite the risks, the two categories remain among the most preferred investment choices, together accounting for more than 23 per cent of active equity mutual fund AUM.  Mid, smallcap funds inflows in 2026

 

According to Amfi data, these categories have witnessed a rise in inflows in 2026 so far despite heightened volatility in the markets.

 

Data showed that the midcap funds attracted inflows of ₹3,185 crore in January, while the smallcap funds reported an inflow of ₹2,942 crore. In the following month (February), the inflows remained resilient with midcap and smallcap funds attracting ₹4,003 crore and ₹3,881 crore, respectively.  The inflows in March even grew despite the benchmark Nifty 50 (down 11.3 per cent) reporting its steepest monthly decline since March 2020. The inflows for the midcap funds surged to ₹6,064 crore and smallcaps to ₹6,264 crore.

 

Investor interest in these two categories remained robust in April as well, with inflows into midcap funds surging to ₹6,551 crore and smallcap funds rising to ₹6,886 crore.  'Mid, smallcap funds long-term performance remains strong'  Vaibhav Chugh, CEO, Abakkus Mutual Fund, said following the sharp rally and elevated valuations witnessed earlier, valuations have moderated in recent months. This has created selective opportunities for long-term investors who can navigate near-term market fluctuations with discipline.

 

"From a performance perspective, both mid and smallcap funds have delivered moderate positive returns over the last three months. However, their long-term track record remains strong, with returns over a three-year period broadly in the range of 18–20 per cent," he said.

 

Currently, there are 33 schemes in the mid-cap category and 36 schemes in the smallcap category.

 

Atul Bhole, senior fund manager, Kotak Mahindra AMC, said that the experience of the past 12-18 months has highlighted both the risks and opportunities in SMIDs. He said that mutual funds offer an effective avenue for participation in small companies that tend to be highly volatile and rewarding at the same time. "Investment teams identify under-researched opportunities, calibrate portfolio exposures, and navigate volatility in an efficient manner," he said.  'Investor behaviour changing'  Navneet Munot, MD & CEO, HDFC AMC, said that mid and small caps have seen sustained traction over the past few months, and what is noteworthy is that flows have remained stable despite periods of significant volatility, including the ongoing geopolitical turbulence.

 

"A large part of this resilience comes from the fact that the majority of investors are investing through SIPs. This tells us that investor behaviour has significantly changed over the last few years. Instead of reacting to short-term noise, investors are thinking long-term and are mindful of the nature of equities," he said.  ====================================== 

Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.