Mid cap funds delivered 27-35% returns over the past five years. That's not a typo.
While large caps offered stability and small caps brought volatility, mid caps hit the sweet spot. Companies ranked 101st to 250th by market value. Big enough to survive downturns. Small enough to grow fast.
At Belong, we've seen many NRIs skip mid caps entirely. Either they stick to "safe" large caps or chase small cap thrills. Both extremes miss the point. The real wealth builders in India often sit in this middle zone.
Companies like Coforge, Max Financial, Persistent Systems. Names you may not hear daily, but ones reshaping their industries.
This guide ranks mid cap funds using transparent criteria. You'll see exactly how we ranked them: by 5-year returns, by AUM, and by expense ratio. We've also included passive index fund alternatives for those who prefer a hands-off approach.
What Are Mid Cap Mutual Funds?
Mid cap funds invest in India's medium-sized companies. SEBI defines mid cap companies as those ranked 101st to 250th by market capitalization on Indian stock exchanges. These companies typically have market caps between ₹5,000 crore and ₹20,000 crore.
By regulation, mid cap funds must invest at least 65% of their assets in mid cap stocks. The remaining 35% can go to large caps, small caps, or cash equivalents.
The Nifty Midcap 150 TRI has delivered 27.9% CAGR over 5 years and 18.7% over 10 years (as of November 2025). This benchmark outperformed both the Nifty 50 and most fixed income options by a wide margin.
👉 Tip: Mid caps work best with a 7-10 year horizon. Short-term investors may experience 20-30% drawdowns during corrections.
Why Mid Caps Deserve a Place in Your Portfolio
Mid cap companies occupy a unique position. They've survived the startup phase. They have proven business models. But they haven't yet become market giants. This leaves room for significant growth.
Higher growth potential than large caps. Mid cap companies are still expanding. They're entering new markets, launching products, and scaling operations. Large caps, by contrast, often struggle to maintain double-digit growth.
Lower volatility than small caps. Small cap funds can swing 40-50% during market corrections. Mid caps typically move 25-35%. Still volatile, but more manageable for NRIs who can't monitor portfolios daily.
Proven business fundamentals. Unlike untested small caps, mid cap companies usually have track records. They've survived multiple business cycles. Their financials are audited and disclosed.
Potential to become large caps. Today's mid cap could be tomorrow's blue chip. HDFC Bank, Bajaj Finance, and Avenue Supermarts were all mid caps at some point. Early investors in these companies made multiples of their investment.
The AMFI data shows mid cap funds received ₹53.31 billion in August 2025 alone. That's the highest monthly inflow ever recorded for this category. Investors clearly recognize the opportunity.
Best Mid Cap Funds Ranked by 5-Year Returns
This is the most common way to compare funds. We've ranked purely by trailing 5-year CAGR. Higher returns appear first.
Ranking Criteria: 5-year annualized returns as of December 2025. Data sourced from Groww, Value Research, and Equitymaster.
Rank | Fund Name | 5Y CAGR | 3Y CAGR | 1Y Return | Expense Ratio |
|---|---|---|---|---|---|
1 | Motilal Oswal Midcap Fund | 30.5% | 27.3% | -6.7% | 0.72% |
2 | Quant Mid Cap Fund | 29.8% | 18.5% | -8.2% | 0.59% |
3 | Edelweiss Mid Cap Fund | 28.1% | 25.6% | 3.3% | 0.40% |
4 | HDFC Mid Cap Fund | 27.4% | 25.4% | 6.5% | 0.71% |
5 | Invesco India Mid Cap Fund | 26.9% | 29.1% | 5.8% | 0.68% |
6 | Nippon India Growth Mid Cap | 26.8% | 26.1% | 4.2% | 0.75% |
7 | Mahindra Manulife Mid Cap | 26.7% | 26.3% | 2.8% | 0.46% |
8 | Sundaram Mid Cap Fund | 25.1% | 25.6% | 3.5% | 0.85% |
9 | Mirae Asset Midcap Fund | 24.3% | 20.6% | 6.5% | 0.56% |
10 | Kotak Emerging Equity Fund | 23.8% | 21.2% | 4.8% | 0.42% |
Data as of December 2025. Source: Groww, Equitymaster
Motilal Oswal Midcap Fund
This fund leads the category with 30.5% returns over 5 years. What makes it stand out? An extremely concentrated portfolio of just 19-20 stocks.
Fund manager Niket Shah follows a high-conviction approach. The top 10 holdings account for nearly 78% of the portfolio. Names like Dixon Technologies (10%), Coforge (9.8%), Trent (9.1%), and Kalyan Jewellers (8.7%) dominate.
This concentration amplifies both gains and losses. When picks work, they really work. When they don't, the fund falls harder than peers. The -6.7% return in 2025 YTD reflects this reality.
Why it stands out: Highest promoter investment among mid cap funds at ₹17.7 billion. When fund managers invest their own money, interests align with investors.
Minimum investment: ₹500 lump sum, ₹500 SIP Exit load: 1% if redeemed within 365 days AUM: ₹37,500 crore
Edelweiss Mid Cap Fund
Launched in 2007, this is one of the oldest mid cap schemes. It delivered 28.1% over 5 years while maintaining lower volatility than peers.
The fund holds 72 stocks across sectors. Top holdings include Max Financial (3.4%), Federal Bank (3.1%), Fortis Healthcare (2.6%), and Dixon Technologies (2.4%). No single stock exceeds 4% allocation.
Financial services (20.4%), consumer discretionary (12.6%), and industrials (18.1%) form the core sectors. This diversification helps during sector-specific downturns.
Why it stands out: Lowest expense ratio among top performers at 0.40%. This cost advantage compounds significantly over long holding periods.
Minimum investment: ₹100 lump sum, ₹100 SIP Exit load: 1% if redeemed within 365 days AUM: ₹12,600 crore
👉 Tip: Compare rolling 3-year returns, not just trailing returns. Funds that consistently appear in the top quartile across multiple periods are more reliable.
HDFC Mid Cap Fund
The largest mid cap fund with ₹83,100 crore AUM. This size brings both advantages and challenges.
Advantages include lower impact costs when buying or selling, better research capabilities, and institutional credibility. Challenges include difficulty finding enough mid cap stocks to deploy such large capital without moving prices.
The fund holds 72 stocks. Top names include Max Financial (4.9%), Balkrishna Industries (3.6%), Coforge (3.2%), and AU Small Finance Bank (3%). It maintains 93% in equities and 7% in cash.
Why it stands out: 20+ year track record since January 2013 launch. Has navigated multiple market cycles successfully including 2020 COVID crash.
Minimum investment: ₹100 lump sum, ₹100 SIP Exit load: 1% if redeemed within 365 days
Best Mid Cap Funds Ranked by AUM (Investor Trust)
Assets Under Management reflects how much money investors have entrusted to a fund. Higher AUM typically indicates investor confidence and longer track records.
Ranking Criteria: Total AUM as of December 2025. Data from AMFI and fund factsheets.
Rank | Fund Name | AUM (₹ Cr) | 5Y CAGR | Expense Ratio |
|---|---|---|---|---|
1 | HDFC Mid Cap Fund | 83,105 | 27.4% | 0.71% |
2 | Nippon India Growth Mid Cap | 38,300 | 26.8% | 0.75% |
3 | Motilal Oswal Midcap Fund | 37,500 | 30.5% | 0.72% |
4 | Kotak Emerging Equity Fund | 32,500 | 23.8% | 0.42% |
5 | Axis Mid Cap Fund | 26,088 | 18.5% | 0.52% |
6 | Mirae Asset Midcap Fund | 18,112 | 24.3% | 0.56% |
7 | Edelweiss Mid Cap Fund | 12,647 | 28.1% | 0.40% |
8 | PGIM India Midcap Opp Fund | 11,285 | 23.3% | 0.46% |
9 | Quant Mid Cap Fund | 8,890 | 29.8% | 0.59% |
10 | Invesco India Mid Cap Fund | 5,589 | 26.9% | 0.68% |
Data as of December 2025. Source: AMFI, Analytics Insight
Nippon India Growth Mid Cap Fund
One of India's oldest mid cap schemes, launched in 1995. Nearly 30 years of track record through multiple market cycles.
The fund holds 95 stocks, making it one of the most diversified in the category. Top sectors include financials (23.5%), industrials (18.2%), and consumer discretionary (17.6%). No single stock exceeds 3.5% allocation.
This diversification means the fund rarely delivers category-topping returns in any single year. But it also rarely ranks at the bottom. Consistency over flashiness.
Best for: Conservative investors who want mid cap exposure without concentrated bets.
Kotak Emerging Equity Fund
Despite strong AUM of ₹32,500 crore, this fund charges just 0.42% expense ratio. That's among the lowest for actively managed mid cap funds.
The fund maintains 75-80% in mid caps with opportunistic allocation to small caps. Returns of 23.8% over 5 years are slightly below category average, but the lower risk profile suits many investors.
Best for: Cost-conscious investors who prefer moderate risk over maximum returns.
Best Mid Cap Funds Ranked by Expense Ratio
Expense ratio directly impacts returns. A fund charging 0.85% eats more of your gains than one charging 0.40%. Over 15-20 years, this difference compounds to lakhs of rupees.
Ranking Criteria: Direct plan expense ratio (lowest to highest).
Rank | Fund Name | Expense Ratio | 5Y CAGR | AUM (₹ Cr) |
|---|---|---|---|---|
1 | Motilal Oswal Nifty Midcap 150 Index | 0.18% | 24.7% | 2,929 |
2 | Edelweiss Mid Cap Fund | 0.40% | 28.1% | 12,647 |
3 | Kotak Emerging Equity Fund | 0.42% | 23.8% | 32,500 |
4 | Mahindra Manulife Mid Cap Fund | 0.46% | 26.7% | 3,994 |
5 | PGIM India Midcap Opp Fund | 0.46% | 23.3% | 11,285 |
6 | Axis Mid Cap Fund | 0.52% | 18.5% | 26,088 |
7 | Mirae Asset Midcap Fund | 0.56% | 24.3% | 18,112 |
8 | Quant Mid Cap Fund | 0.59% | 29.8% | 8,890 |
9 | Invesco India Mid Cap Fund | 0.68% | 26.9% | 5,589 |
10 | HDFC Mid Cap Fund | 0.71% | 27.4% | 83,105 |
Data as of December 2025. Source: Fund factsheets, Groww
Why Mahindra Manulife Mid Cap Stands Out
Among actively managed funds with proven track records, Mahindra Manulife offers 26.7% returns at just 0.46% expense ratio. That's exceptional value.
Launched in 2018, the fund is relatively young but has delivered consistently. It holds 60-70 stocks with financials, industrials, and healthcare as top sectors. The fund manager follows a growth-at-reasonable-price approach.
Best for: Value-conscious investors who want top-tier returns without premium pricing.
👉 Tip: Always choose Direct plans over Regular plans. The expense difference (0.5-1% annually) compounds to significant amounts over 15-20 years.
Index Funds vs Active Mid Cap Funds
Here's a question worth considering: Should you just buy a Nifty Midcap 150 index fund instead?
The mid cap index has delivered 27.9% CAGR over 5 years. That's better than most actively managed mid cap funds. And index funds charge just 0.15-0.30% in expenses.
Parameter | Active Mid Cap Fund | Midcap 150 Index Fund |
|---|---|---|
Expense Ratio | 0.4-0.85% | 0.15-0.30% |
5Y Returns (avg) | 24-30% | 24-25% |
Stock Selection | Fund manager decides | Passive replication |
Risk | Varies by fund | Market risk only |
Goal | Beat the benchmark | Match the benchmark |
When Index Funds Make Sense
Consider index funds if you believe active managers can't consistently beat the market in this space. The data partially supports this view. Only about 35-40% of active mid cap funds beat the Nifty Midcap 150 over 5-year periods.
Index funds also work well for investors who want pure mid cap exposure without fund manager bias. You get exactly what the market delivers, no more, no less.
When Active Funds Make Sense
Top active funds like Motilal Oswal (30.5%) and Edelweiss (28.1%) have beaten the index significantly. If you can identify and stick with consistent outperformers, active management adds value.
Active funds also offer downside protection during corrections. Fund managers can hold cash or shift to defensive sectors. Index funds must stay fully invested regardless of market conditions.
Our view: Consider a core index holding supplemented by 1-2 high-conviction active funds. This balances cost efficiency with alpha potential.
Best Nifty Midcap 150 Index Funds
If you prefer the passive route, here are the top Midcap 150 index funds:
Fund Name | Expense Ratio | 5Y CAGR | AUM (₹ Cr) |
|---|---|---|---|
Motilal Oswal Nifty Midcap 150 Index | 0.18% | 24.7% | 2,929 |
HDFC Nifty Midcap 150 Index Fund | 0.30% | 24.5% | 465 |
SBI Nifty Midcap 150 Index Fund | 0.25% | 24.4% | 1,850 |
Nippon India Nifty Midcap 150 Index | 0.22% | 24.5% | 1,200 |
UTI Nifty Midcap 150 Index Fund | 0.25% | 24.3% | 850 |
Data as of December 2025. Source: Groww, fund factsheets
Our pick: Motilal Oswal Nifty Midcap 150 Index Fund offers the lowest expense ratio at 0.18% with adequate AUM and liquidity.
How Mid Caps Performed in Different Market Conditions
Understanding how mid caps behave in various scenarios helps set realistic expectations.
Bull Markets (2020-2021)
Mid cap funds delivered 50-80% returns. The post-COVID rally rewarded risk-taking investors handsomely. Funds with concentrated portfolios like Motilal Oswal outperformed significantly.
Corrections (2022, 2024)
During the 2022 correction, mid cap funds fell 15-25%. Some small cap-heavy mid cap funds dropped even more. The recent 2024 correction saw similar patterns.
Sideways Markets
Mid caps tend to underperform during prolonged sideways phases. Without clear direction, liquidity flows to large caps or fixed income. Patient investors who stayed invested eventually benefited when trends resumed.
Key Takeaway
Mid caps reward patience. If you need money within 3-5 years, consider more conservative options. If you have 7-10+ years, mid caps historically deliver superior returns despite interim volatility.
Sector Allocation: Where Mid Cap Funds Invest
Understanding sector exposure helps you avoid over-concentration in your overall portfolio.
Sector | Average Allocation | Top Picks |
|---|---|---|
Financial Services | 18-24% | Max Financial, AU Small Finance, Federal Bank |
Industrials | 15-20% | Cummins India, ABB, Siemens |
Consumer Discretionary | 12-18% | Trent, Dixon Technologies, Kalyan Jewellers |
Healthcare | 10-15% | Fortis Healthcare, Max Healthcare, Narayana Health |
Technology | 8-12% | Coforge, Persistent Systems, Mphasis |
Auto & Ancillaries | 8-12% | Balkrishna Industries, Tube Investments |
If your portfolio already has significant financial sector exposure through banking stocks or large cap funds, consider mid cap funds with lower financial allocation.
👉 Tip: Check sector overlap between your funds. Owning 3 mid cap funds with 25% each in financials gives you 75% financial exposure across those holdings.
Taxation for NRIs on Mid Cap Funds
Tax rules changed significantly after July 23, 2024. Here's the current structure for equity-oriented funds:
Capital Gains Tax
Holding Period | Tax Rate | Notes |
|---|---|---|
Less than 12 months (STCG) | 20% | Changed from 15% in July 2024 |
More than 12 months (LTCG) | 12.5% on gains above ₹1.25L | Changed from 10% above ₹1L |
TDS for NRIs
Banks and AMCs deduct TDS on redemptions:
- STCG: 20% TDS
- LTCG: 12.5% TDS on gains exceeding ₹1.25 lakh
You can claim refunds by filing ITR if TDS exceeds actual liability.
Tax Optimization Strategies
Use the ₹1.25 lakh exemption annually. Redeem gains up to this limit each financial year tax-free.
Split redemptions across two years. If you have ₹3 lakh in gains, redeem ₹1.5 lakh in March and ₹1.5 lakh in April. Use two years' exemptions.
Consider DTAA benefits. UAE doesn't tax capital gains. You may claim relief through proper documentation.
For detailed tax guidance, use our NRI tax filing service.
A Smarter Alternative: GIFT City Funds
Here's what many NRIs miss: GIFT City mutual funds offer potentially tax-free returns for UAE residents.
Under Section 10(4D) of the Income Tax Act, capital gains from GIFT City funds are exempt from Indian tax. Combined with UAE's zero-tax environment, you effectively pay 0% on investment gains.
Regular vs GIFT City: A Comparison
Parameter | Regular Mid Cap Fund | GIFT City Alternative |
|---|---|---|
STCG Tax | 20% | 0% (for UAE NRIs) |
LTCG Tax | 12.5% above ₹1.25L | 0% (for UAE NRIs) |
Currency | INR | USD |
TDS | Yes | No |
Repatriation | Via NRE/NRO | Fully repatriable |
Tax Savings Example
Invest ₹50 lakh in a mid cap fund earning 25% annually for 10 years:
- Regular fund: Corpus ₹4.66 crore, Tax on gains ~₹52L = Net ₹4.14 crore
- GIFT City: Corpus ₹4.66 crore, Tax = ₹0 = Net ₹4.66 crore
That's ₹52+ lakh saved purely through tax efficiency.
Explore options through our GIFT City mutual funds explorer.
How to Select the Right Mid Cap Fund
With 30+ options, choosing can feel overwhelming. Here's our framework:
Step 1: Define Your Risk Appetite
Risk Profile | Recommended Approach |
|---|---|
Moderate | Diversified funds with 70+ stocks (HDFC, Nippon India) |
High | Concentrated funds with high-conviction bets (Motilal Oswal) |
Index-focused | Nifty Midcap 150 Index Funds |
Step 2: Check Consistency
Don't just look at 5-year returns. Evaluate:
- Rolling returns: How has the fund performed across various 3-year periods?
- Quartile ranking: Is the fund consistently in top 2 quartiles?
- Downside capture: How much did it fall relative to benchmark during corrections?
Step 3: Evaluate Fund Manager Tenure
Mid cap stock selection requires deep research. Fund managers with 5+ year tenure at the same fund understand their portfolio companies intimately.
Recent fund manager changes (within 1-2 years) warrant caution. The new manager may shift strategy, affecting future returns.
Step 4: Consider Portfolio Overlap
If you already own large cap or flexi cap funds, check if they hold the same mid cap stocks. Duplication reduces diversification benefits.
Use Belong's fund comparison tools to analyze portfolio overlap.
Model Portfolios for Different Goals
Conservative Approach (First-Time Mid Cap Investor)
Allocation | Fund Type | Example |
|---|---|---|
50% | Nippon India Large Cap | |
30% | Mid Cap (Diversified) | HDFC Mid Cap Fund |
20% | ICICI Pru Balanced Advantage |
Expected returns: 15-18% with moderate volatility
Growth Approach (Experienced Investor, 10+ Year Horizon)
Allocation | Fund Type | Example |
|---|---|---|
40% | Mid Cap (Active) | Edelweiss Mid Cap Fund |
30% | Mid Cap Index | Motilal Oswal Midcap 150 Index |
20% | SBI Small Cap Fund | |
10% | Parag Parikh Flexi Cap |
Expected returns: 18-25% with higher volatility
Aggressive Approach (High Risk Tolerance, 15+ Year Horizon)
Allocation | Fund Type | Example |
|---|---|---|
50% | Mid Cap (Concentrated) | Motilal Oswal Midcap Fund |
30% | Quant Small Cap Fund | |
20% | Infrastructure/Manufacturing |
Expected returns: 22-30% with significant volatility
How to Invest in Mid Cap Funds as an NRI
Step 1: Complete KYC
You'll need:
- PAN card
- Passport with valid visa
- Overseas address proof
- Passport-size photograph
Most AMCs offer video KYC for remote completion from the UAE.
Step 2: Link Your Bank Account
Open an NRE or NRO account with an Indian bank:
- NRE: Full repatriation of principal and gains
- NRO: ₹1 million annual repatriation limit
Step 3: Choose Direct Plans
Always select Direct plans to avoid distributor commissions. This saves 0.5-1% annually.
Step 4: Start SIP for Mid Caps
Given mid cap volatility, SIP (Systematic Investment Plan) works better than lump sum for most investors. It averages out purchase prices across market cycles.
Use our NRI FD rates tool to compare stable alternatives for the fixed income portion of your portfolio.
Common Mistakes to Avoid
1. Timing the Market
Many NRIs wait for corrections to invest in mid caps. Problem: You often miss the rally waiting for the "perfect" entry point. Start SIPs regardless of market conditions.
2. Chasing Recent Toppers
The fund that gave 40% last year might give 5% next year. Look at rolling 3-5 year returns across multiple periods, not just trailing returns.
3. Holding Too Many Mid Cap Funds
Three mid cap funds provide little diversification beyond one good fund. They all invest in similar companies. Stick to 1-2 mid cap funds maximum.
4. Ignoring Expense Ratios
A 0.45% difference in expense ratio may seem trivial. Over 20 years on ₹50 lakh investment, it's ₹12-15 lakh in additional returns.
5. Redeeming During Corrections
Mid cap funds can fall 25-35% during market corrections. If you redeem in panic, you lock in losses. Stay invested for 7+ years.
6. Ignoring Tax-Efficient Alternatives
UAE NRIs paying 12.5-20% tax on mutual fund gains unnecessarily. Explore GIFT City funds for tax-free returns.
When Should You Avoid Mid Cap Funds?
Mid caps aren't suitable for everyone. Consider alternatives if:
You need funds within 5 years. Mid caps can remain underwater for 2-3 years during prolonged corrections. Choose debt funds or conservative hybrid funds instead.
You can't tolerate 25%+ drawdowns. If watching your portfolio fall by a quarter would trigger panic selling, stick to large caps or balanced advantage funds.
Your overall equity allocation exceeds 70%. Adding more mid caps increases portfolio risk. Consider rebalancing toward fixed income or gold.
You're approaching retirement. If you plan to return to India within 5-7 years, reduce mid cap exposure gradually. Shift toward stable income-generating investments.
Take Your Next Step
Mid cap funds offer compelling growth potential for patient investors. Whether you choose high-conviction active funds or low-cost index options, the key is starting early and staying invested through market cycles.
Use Belong's NRI FD Comparison Tool to explore stable alternatives for the conservative portion of your portfolio. Check your residential status to understand tax implications correctly.
For tax-efficient equity exposure, explore GIFT City mutual funds that offer potentially zero tax on capital gains for UAE residents.
Have questions about which mid cap fund fits your situation? Join our WhatsApp community where many NRIs discuss their investment strategies daily. Or download the Belong app to start investing in tax-efficient GIFT City products.
Disclaimer: Mutual fund investments are subject to market risks. Past performance does not guarantee future returns. Rankings in this article use transparent criteria (5-year returns, AUM, expense ratio) and should not be considered investment recommendations. Consult a SEBI-registered advisor before investing.
Sources
- AMFI - Association of Mutual Funds in India
- SEBI - Securities and Exchange Board of India
- Groww Mid Cap Funds
- Equitymaster Fund Analysis
- Value Research Online
- Analytics Insight - December 2025 Report
- Zee Business - SIP Returns Analysis
- Outlook Money - Fund Flows 2025
- INDmoney Research
- NSE India - Index Data
