In March, several Indian midcap funds parked notable portions of their portfolios in cash. Axis Midcap Fund led with about 9.3% cash, while Taurus Mid Cap held 8.8%. HDFC Mid Cap reported 7.7% cash, and Baroda BNP Paribas and Bank of India Mid Cap funds followed with 7.5% and 6.5%.
Indian stocks logged a second straight session of losses, with the Sensex down about 400 points to 77,448 and the Nifty 50 edging lower to 24,214. Both benchmarks fell over half a percent, but midcap and smallcap indices showed resilience, outperforming the broader market. Volatility stayed stable even as trading turned cautious.
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While the Nifty 50 lingers in a tight trading band, India’s midcap and smallcap segments are pushing to fresh highs. Vinay Rajani attributes the mismatch to foreign institutional investors staying away from large-cap trades, leaving Nifty trailing global peers. Analysts still expect a credible Nifty breakout, with 24,000 flagged as key support.
ETMutualFunds analysis of 246 equity schemes finds only seven funds delivering over 25% CAGR across three years. Bandhan Small Cap Fund leads at 30.24%, ahead of midcap winners like HSBC Midcap Fund at 26.55% and ICICI Prudential Midcap Fund at 25.92%, highlighting standout performance in small and midcap categories.
AMFI’s H2 CY26 reclassification could demote nine midcap stocks, including Physicswallah and Jubilant Foodworks, if revised market-cap thresholds are approved. According to Nuvama Institutional Equities, the change may force mutual funds to rebalance portfolios and investors to reconsider stock positioning as categories shift between midcap and smallcap.
Nuvama Institutional Equities expects AMFI’s H2 CY26 categorisation to be reshuffled as market-cap thresholds change. Some stocks currently tagged as largecaps, including Mazagon Dock, could be moved into midcaps, while midcaps may drift toward smallcap status. The shift highlights how valuation swings can rapidly alter India’s equity segmentation.
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ICRA Analytics says midcap and smallcap mutual funds have delivered strong 5-year AUM growth, with CAGRs of 32.41% and 39.93%. Yet the outlook is clouded by rising geopolitical tensions and possible foreign fund outflows that can pressure near-term performance. Investors may need a more cautious approach as volatility persists.
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