Small and midcap funds have outperformed large cap funds in 2015. While historically, small and midcap funds tend to underperform large cap funds in volatile market conditions, 2015 has been an exception. But even if we ignore 2015, small and midcap funds have the potential to provide higher returns in the long term, despite their intrinsic volatility. SIPs take advantage of volatility by averaging out the rupee cost of the units purchased and therefore especially effective for investing in small and midcap funds. Small and midcap funds have outperformed large cap oriented funds in terms of trailing returns over the last 5 year period. See last 1 year, 3 years and 5 years trailing annualized returns for large cap oriented and small & midcap funds in the table below.

We can see that Small and midcap funds have on average outperformed large cap funds, across different time-scales.

In this article, we will look at the best performing SIPs in small and midcap equity funds in the last five years. For our analysis, we have assumed a monthly SIP amount of 5,000 made over the past 5 years. Please note that, for the purpose of our analysis, we have considered growth options only. We have excluded funds which have an asset base of less than 100 crores. Here is the list of top 7 small and midcap funds for systematic investment plans, based on the last 5 year SIP returns.

With just a 5,000 monthly SIP ( 3 lacs cumulative over the period) in these small and midcap funds, the investors would have accumulated 6.3 – 7 lacs in the last five years. The SIP returns of these funds are in the range of 31 – 36%. The SIP returns in these funds have beaten the lump sum returns during this period, by taking advantage of the volatility of midcap funds through the mechanism of rupee cost averaging. By investing a fixed amount every month, the SIP investor buys less number of units if the market goes up and more units if the market goes down.


In this article, we have looked at the top 7 small and midcap equity funds in terms of 5 year SIP returns. These SIPs have given very high returns in the range of 31 – 36% SIP returns during this period. Investors should consult with their financial advisors regarding the suitability of these funds for their SIPs.

(First published in

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