Systematic Investment Plans (SIPs) have proven to be a powerful tool for wealth creation, and a recent study highlights which mutual fund categories have delivered the most substantial returns over the past decade. Small-cap and mid-cap mutual funds have emerged as the clear frontrunners, significantly outperforming their large-cap and diversified equity counterparts.
The analysis, spanning from July 1, 2016, to July 15, 2026, examined the top five equity mutual funds across seven major categories: Flexi Cap, Focused, Large & Mid Cap, Large Cap, Mid Cap, Multi Cap, and Small Cap. The findings underscore that investors willing to embrace higher risk have historically been rewarded with superior long-term gains, while large-cap funds offered more modest but stable growth.
Small-Cap Funds Dominate Returns
Among all categories, Small Cap funds showcased exceptional performance, with the top five schemes delivering an impressive average 10-year SIP return of nearly 23%. The standout performer in this category was the Quant Small Cap Fund, which generated an annualised SIP return of 25.95%. Other top performers included Nippon India Small Cap Fund (22.44%), Axis Small Cap Fund (20.76%), Union Small Cap Fund (20.33%), and DSP Small Cap Fund (20.11%).
This robust performance reflects a strong rally in India's broader markets over the last decade, where smaller companies benefited from improved corporate earnings, increased domestic investment, and expanding economic opportunities. However, financial experts advise caution, noting that small-cap funds are also known for higher volatility during market downturns.
Mid-Cap Funds Secure Second Place
Following closely behind, Mid Cap funds ranked second in wealth creation, achieving an average 10-year SIP return of approximately 21%. The Invesco India Mid Cap Fund led this category with a return of 22.13%. Other strong performers included Edelweiss Mid Cap Fund (21.52%), Nippon India Growth Mid Cap Fund (21.04%), Quant Mid Cap Fund (20.59%), and Motilal Oswal Midcap Fund (20.49%), all delivering annualised SIP returns above 20%.
Performance Across Other Categories
- Flexi Cap funds: Averaged just over 18%, with Quant Flexi Cap Fund leading at 21.16%.
- Multi Cap funds: Posted healthy returns, averaging nearly 18%, topped by Quant Multi Cap Fund at 18.98%.
- Large & Mid Cap category: Occupied the middle of the rankings with average SIP returns of around 18%, led by Invesco India Large & Mid Cap Fund at 19.02%.
- Focused funds: Delivered average returns of about 17%, with ICICI Prudential Focused Equity Fund topping at 18%.
- Large Cap funds: Recorded the lowest average 10-year SIP returns, ranging from 14% to 15%, with Nippon India Large Cap Fund performing best at 15.23%.
The study reinforces a fundamental investment principle: while higher-risk categories can generate superior long-term returns, they demand patience and the ability to withstand market fluctuations. Financial planners emphasize that investors should align their fund choices with their individual risk appetite, investment horizon, and overall asset allocation strategy, rather than relying solely on past performance.