Mid-cap vs flexi-cap vs large-cap funds: Which delivered better returns in 5 and 10 years?

Data for the quarter ended September 2026 shows that mid-cap funds delivered an average annualised return of 13.41% over five years and 14.80% over 10 years. Flexi-cap funds followed with returns of 9.38% and 12.48%, respectively. Large-cap funds delivered 7.20% over five years and 10.72% over 10 years.

The difference is significant. A category that has delivered better returns over a long period can help investors build wealth, but it does not necessarily mean it will perform better in every market cycle. Investors also need to consider how much volatility they can tolerate, when they will need the money and whether their portfolio is sufficiently diversified.

The September data offers another useful lesson. All three categories reported negative average returns for the month as the equity market corrected. Yet investors continued putting money into these funds, suggesting that the market weakness did not immediately derail demand for equity mutual funds.

Mid-cap funds lead the five- and 10-year return race

ICRA Analytics’ category-wise performance data shows a clear gap between the three categories over longer periods. Mid-cap funds have maintained the lead over both five and 10 years, while flexi-cap funds have outperformed large-cap funds over these periods.

Average annualised returns

Fund category	1 year	3 years	5 years	10 years
Large-cap	-3.78%	8.05%	7.20%	10.72%
Mid-cap	5.24%	14.22%	13.41%	14.80%
Flexi-cap	0.91%	10.33%	9.38%	12.48%

Source: ICRA Analytics, Mutual Fund Screener for September 2026, page 21. These are category averages across open-ended schemes, not returns of any individual fund. Returns for periods of one year and above are compounded annualised returns.

The numbers show that the gap between mid-cap and large-cap funds has widened over longer investment periods. Mid-cap funds delivered 13.41% over five years, compared with 7.20% for large-cap funds. Over 10 years, the corresponding returns were 14.80% and 10.72%.

Flexi-cap funds occupied the middle ground, delivering better average returns than large-cap funds but trailing mid-cap funds over both periods.

However, investors should not interpret these numbers as a promise that mid-cap funds will always outperform. Returns depend on market conditions, valuations, portfolio choices and the performance of the companies held by individual schemes. The figures also represent category averages, so the performance of a particular fund may differ materially.

What makes these three categories different?

The difference in returns becomes easier to understand when investors look at what each category is designed to do.

Large-cap funds invest predominantly in large companies. These businesses tend to be more established, with greater scale and more established operations. Their shares can still fall sharply during market corrections, but the category generally provides exposure to the larger end of the market.

For investors who want equity exposure but are uncomfortable with the volatility associated with smaller companies, large-cap funds may be worth evaluating. However, they are not capital-protection products and can deliver weak returns over shorter periods.

Mid-cap funds invest in medium-sized listed companies. These businesses may have greater room to expand than established large companies, but their earnings, valuations and share prices can also be more sensitive to economic conditions.

This can work in investors’ favour during a strong market cycle. It can also magnify losses when market sentiment weakens or valuations come under pressure. The higher long-term average returns in the ICRA report therefore need to be viewed alongside the possibility of sharper interim declines.

Flexi-cap funds give fund managers the flexibility to invest across large-, mid- and small-cap stocks, subject to the category’s regulatory requirements. This allows the portfolio to adjust its market-capitalisation exposure based on the fund manager’s assessment of opportunities.

That flexibility can be useful, but it does not guarantee better returns or lower risk. Two flexi-cap funds can look very different depending on their allocation to large, mid and small companies, sector exposure and investment strategy.

For investors, the choice should depend on the role the fund is expected to play in the portfolio rather than simply on which category has delivered the highest historical return.

September correction offers a reminder about short-term risks

The long-term numbers tell only part of the story. ICRA’s data also shows that all three categories recorded negative average returns in September 2026.

Large-cap funds delivered an average return of -5.87% for the month, while mid-cap funds fell 6.04%. Flexi-cap funds declined 5.03%.

The correction was not limited to mutual funds. The report says the Nifty 50 ended the September quarter with losses after gains in July and part of August were erased by a sharp sell-off in September. Foreign investor selling, higher global bond yields, rising crude oil prices, rupee weakness and concerns about inflation weighed on market sentiment.

The September returns also show why investors should be cautious about judging a category from a single month. Mid-cap funds led over five and 10 years but recorded a slightly larger fall than large-cap funds in September. Flexi-cap funds saw a smaller average decline than either category during the month.

A single month’s performance does not establish which category is safer or better. It does, however, underline that the investment experience can differ considerably from the long-term annualised return shown in a table.

Investors who need their money in the next few years should be particularly careful about relying on equity mutual funds to meet a fixed deadline. Even a category with strong long-term returns can be in the red when the money is needed.

Investors continue to put money into all three categories

Despite the market correction, AMFI’s September 2026 data shows that investors continued to invest in large-cap, mid-cap and flexi-cap funds. Mid-cap funds attracted substantially more net inflows than large-cap funds, while flexi-cap funds also saw an increase in net inflows compared with August.

September flows and category assets

Fund category	September net inflows	August net inflows	AUM as on September 30, 2026
Large-cap	Rs 859 crore	-Rs 1,147 crore	Rs 3.90 lakh crore
Mid-cap	Rs 7,835 crore	Rs 6,989 crore	Rs 5.14 lakh crore
Flexi-cap	Rs 6,702 crore	Rs 5,059 crore	Rs 5.88 lakh crore

Source: AMFI September 2026 monthly data. Figures are rounded. AUM is the assets under management reported for each category at the end of September. Net inflows are the difference between money invested and money withdrawn during the month.

Mid-cap funds attracted about Rs 7,835 crore in September, up from around Rs 6,989 crore in August. Flexi-cap inflows increased to Rs 6,702 crore from Rs 5,059 crore. Large-cap funds recorded net inflows of around Rs 859 crore after seeing net outflows of about Rs 1,147 crore in August.

The numbers suggest that investor interest in mid-cap and flexi-cap funds remained strong even as markets corrected. Large-cap funds, meanwhile, returned to positive net inflows after withdrawals in the previous month.

These flows need to be interpreted carefully. Net inflows show the difference between purchases and redemptions, not the investment returns earned by existing investors. They also do not establish that investors are making the right choice for their goals.

A fund category can attract strong inflows even when its recent returns are weak. Similarly, an increase in AUM can reflect both new investments and gains in the market value of existing holdings.

Flexi-cap funds have the largest AUM among the three

The AUM numbers offer another perspective on investor preferences. As of September 30, 2026, flexi-cap funds had assets of around Rs 5.88 lakh crore, followed by mid-cap funds at Rs 5.14 lakh crore and large-cap funds at Rs 3.90 lakh crore.

The difference is notable because mid-cap funds delivered higher average long-term returns in the ICRA report, but flexi-cap funds held the largest asset base among these three categories.

AUM, however, should not be treated as a measure of investment quality. It reflects the total assets held by schemes in a category and is influenced by market performance, investor flows and the number and size of schemes. A larger AUM does not automatically mean a category will deliver better returns.

The category-wise folio data also points to substantial investor participation. ICRA reported around 2.68 crore mid-cap folios, 2.50 crore flexi-cap folios and 1.70 crore large-cap folios at the end of September.

A folio is an investment account maintained by a mutual fund house. It is not the same as a unique investor, since one investor can hold multiple folios across schemes or fund houses.

The figures suggest that mid-cap funds have a large retail investor base, while flexi-cap funds have built an even larger asset pool. This makes it important for investors to understand the risks they are taking rather than relying only on category popularity.

Should investors choose mid-cap funds for higher returns?

The ICRA data may make mid-cap funds look attractive to investors focused on long-term wealth creation. Their average five- and 10-year returns were higher than those of large-cap and flexi-cap funds. But the right choice depends on an investor’s time horizon, risk tolerance and existing portfolio.

Investors with a long investment horizon and the ability to withstand sharp falls may consider mid-cap exposure as part of a diversified equity portfolio. They should be prepared for periods when returns are weak and recovery takes time.

Large-cap funds may suit investors looking for exposure to established businesses, but they can still experience significant market losses. Flexi-cap funds may offer a middle ground because fund managers can invest across market capitalisations, although the actual risk depends on each scheme’s portfolio.

Investors should also avoid assuming that owning one fund from each category automatically creates diversification. If the funds hold many of the same stocks or have similar sector exposures, their portfolios may behave alike during a correction.

Before investing, readers should check the scheme’s portfolio, benchmark, expense ratio, risk level and consistency of performance across different market cycles. They should also consider whether their investments are aligned with goals such as retirement, a child’s education or a home purchase.

The takeaway

Mid-cap funds have delivered the strongest average five- and 10-year returns among the three categories in ICRA Analytics’ September 2026 report. Flexi-cap funds came second, while large-cap funds trailed on the same measure.

But the September correction is a reminder that historical returns do not tell investors how their portfolios will behave over the next month or year. The strongest-performing category over a decade may not be the best choice for someone who needs the money soon or cannot tolerate large losses.

For investors, the more useful question is not simply which category has delivered the highest return. It is which category fits their investment horizon, financial goals and ability to stay invested through market volatility.

Disclaimer: This article is for information and education purposes only. Mutual fund investments are subject to market risks. Past performance does not guarantee future returns. Investors should assess their financial goals, investment horizon and risk tolerance before investing.

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