MidCap, SmallCap Inflows Soar to Record Highs in 2025 Despite Muted Returns

• Mid-cap and small-cap mutual fund schemes saw record inflows in 2025, reaching Rs 49,939 crore and Rs 52,321 crore respectively, despite market volatility and muted returns.
• The BSE MidCap index rose 1.1% and the BSE SmallCap index declined 6.6% in 2025, significantly underperforming Sensex and Nifty gains of 9% and 10.5%.
• Steady SIP investments and investors averaging down during market declines fueled these inflows, driven by strong three-to-five-year outperformance of these segments.
• Domestic investors were the primary source of these inflows, preferring mid-cap and small-cap schemes, while foreign investors largely avoided these segments.
• Mid-cap and small-cap funds accounted for a record 14.26% and a two-year high of 14.26% respectively of total equity inflows, indicating sustained investor commitment despite weak near-term performance.

Why It Matters: Record inflows into mid-cap and small-cap funds in 2025 highlight sustained domestic investor confidence despite weak returns.