Unlocking the Strong Potential of Mid-Cap Mutual Funds: 3 Top Performers Over 10 Years
Mid-cap stocks occupy a unique and rewarding niche in the investment universe. Positioned between the relative stability of large-cap companies and the high-growth, high-risk profile of small caps, mid-caps offer investors compelling returns but not without volatility. The very nature of mid-cap investing demands a certain mindset: commitment to long-term growth over short-term gains.
Mid-cap funds are a compromise between large and small cap funds as the former focuses on stability of income, while the latter runs after quick growth. They invest in companies that have gone beyond the early startup phase but that are still experiencing significant growth. This space represents a place where growth-oriented investors can be involved in narratives that could potentially grow to become large caps one day.
Mid-cap mutual funds are designed to tap this combination of growth and risk. According to its regulation, these funds will allocate at least 65% percent of their total assets invested in mid-sized companies, guaranteeing that an appropriate amount would be exposed in this segment. This requirement supports long-term bias and prevents knee-jerk reactions to short-term market fluctuations. During the last 10 years, the strategy of “time in the market” as opposed to “timing it” has borne fruit for mid-cap investors.
Why Mid-Cap Investing Requires Patience
Mid-cap stocks are generally more sensitive to changes in the business cycle, as well as broad market and economic conditions, than their large-cap counterparts. This can mean that the strategy can grow quickly during bullish periods, but also suffer long drawdowns when markets become difficult. This volatility is not detrimental for long-term investor it’s compensation for the potential to earn higher returns.
The Nifty Midcap 150 Total Return Index that represents a wider set of mid-cap stocks returned an annualised return CAGR of 17.9% over the past ten years. This performance underscores the attractive long-term potential of this segment, especially for those investors with the patience to stick to their guns through market cycles rather than stress about short-term movements.
Given this broad-based surge in mid-cap stocks, some mid-cap mutual funds have also been outperforming the benchmark over the long term.
Mid-Cap Funds That Have Fetched Great Returns
Edelweiss Midcap Fund
This scheme was started in December 2007, and it has a track record of almost two decades. As of 31 December 2025, the fund had an Asset Under Management (AUM) of ₹136.59 billion and a direct plan expense ratio of 0.4%. The scheme aims to generate long-term capital appreciation by investing in equity and equity-related securities of mid-cap companies.
The fund tracks the FAIR (Forensic, Acceptable price, Investment-style agnostic and Robust) investment methodology, which targets robust characteristics at a reasonable price and strong fundamentals. Investing 97.79% in equities and having a diversified portfolio of 88 stocks, the fund has its investments parked mostly in mid-cap (76.78%) with portions at large-caps (12.09%) and small-caps (11.13%).
Sectoral distribution is well spread out, with financials (30.58%) leading the charge, followed by the capital goods sector, auto, auto ancillary, healthcare, and information technology. Holdings: The top 10 holdings include Persistent Systems, Coforge, Marico, MCX, and BSE, layering sectoral balance here.
Performance of the fund over the last 10 years as of 15 January 2026: The return with the Regular variant of the fund was a CAGR of 19.08% and was higher than the category average returns, Nifty Midcap 150 TRI 17.9%. It also showed good risk-managed returns, a Sortino ratio of 0.76, and a Sharpe ratio of 0.39, both better than the benchmark.
Motilal Oswal Midcap Fund
The Motilal Oswal Midcap Fund, an open-ended equity scheme investing in mid-cap stocks, was launched in February 2014 and seeks to achieve long term capital appreciation by primarily investing in a maximum of 25 high conviction mid-cap companies with competitive advantages. As of 31 December 2025, the fund had an AUM of ₹368.8 billion, but it has a slightly higher expense ratio of 0.74% for the direct plan.
What is unique to this fund is the promoter contribution of ₹17.7 billion, which indicates strong alignment with investor interest. The portfolio is still concentrated, containing only 19 stocks, with the top 10 comprising 66.13% of the allocation. Its prominent holdings are Persistent Systems, Coforge, Paytm, Kalyan Jewellers, and Dixon Technologies.
While the fund’s PE ratio of 52.32 is high compared to the benchmark, the CAGR of 18.83% over a decade indicates pretty strong performance. However, higher volatility is evident, with a standard deviation of 17.33. Risk metrics such as the Sortino ratio 0.63 suggest slightly weaker performance in mitigating downside risk, and a Sharpe ratio of 0.34 is on par with the benchmark. Investors considering this fund must be comfortable with concentrated exposure and higher churn, as indicated by the turnover ratio.
HDFC Midcap Fund
The HDFC Midcap Fund, which was first introduced in January 2013, is known for providing a balanced and diversified approach. Carrying an AUM of ₹926.41 billion as of 31st December 2025, and an expense ratio of 0.74%, the objective of this scheme is to invest in double-digit earnings growth companies available at reasonable valuations.
The fund portfolio comprises 77 stocks, and 92.88% is invested in equities. Its PE ratio, sitting at 26.42, is less than the peer’s, and may not be overpriced right now by investors, while the local industry also trades at a median PE of 19.6. Its PE multiple of 26.42 is more conservative than the benchmark, reflecting a focus on valuation discipline. The top 10 holdings, which account for 33.2% of the portfolio, include Max Financial, AU Small Finance Bank, Federal Bank, Indian Bank, and Balkrishna Industries.
This fund’s strategy emphasises lower volatility and strong risk management, with a standard deviation of 13.56, significantly lower than the benchmark. Risk-adjusted metrics further reinforce this strength: a Sortino ratio of 0.89 and a Sharpe ratio of 0.42 both outperform the Nifty Midcap 150 TRI. Over the past decade, the fund delivered a 18.49% CAGR, underscoring consistent performance with reduced drawdowns.
What This Means for Investors
Mid-cap funds favor long-term investors. Investing in a midcap fund is rewarding for an investor who hangs on to the investment over a long period. Volatility is a natural part of this space, but disciplined stock selection and portfolio construction, not simply chasing short-term momentum, often works best. Those who can keep an aggregate forefinger on the I won’t panic button should reap the rewards of compounding.
Weighing one mid-cap fund against another has to do with risk tolerance, investment horizon, and return aspirations. Those preferring steady growth while maintaining risk cautiously may consider diversified, lower-turnover schemes such as the HDFC Midcap Fund. For those looking for higher upside potential and are ready to take on volatility, funds such as Edelweiss Midcap can be looked at.
Conclusion
Midcap mutual funds still remain a good proposition for investors with a long-term horizon looking to build wealth beyond what pure large-cap funds offer. The performance of funds like Edelweiss Midcap, Motilal Oswal Midcap, and HDFC Midcap in the past decade reflects the power of mid-cap investing when done with a long-term perspective and a lot of discipline.
If you invest with a long time horizon and consistent investment amounts in mid-cap funds, you can capture some of the compounding-growth potential that these mid-sized companies have to offer as they grow into tomorrow’s large names.
Also Read: ELSS Tax Saver Funds in 2026: Motilal Oswal, SBI and HDFC Funds Explained for Long-Term Investors
