Top Midcap Mutual Funds That Outperformed in the Last 5 Years

Midcap mutual funds are equity schemes that primarily invest in medium-sized companies, usually ranked between the 101st and 250th companies by market capitalization. These businesses are often considered the "sweet spot" of investing—they are no longer small, risky startups, yet they still have significant room for growth compared to large, established corporations.

Investors typically choose midcap funds as their first option, as these funds offer a safe combination of growth opportunities and wealth creation. It has been witnessed that midcaps have provided better returns as compared to large caps over a period of several years. However, these stocks can also be quite unstable in the short term. The experience of the past has shown that stocks of mid-cap companies have been among the most powerful wealth creators for investors who have the patience and holding period of medium to long-term.

The purpose of this article is to analyze the yearly performance of leading midcap funds from 2020 to 2025. This period includes extraordinary market events—from the COVID-19 market crash to the subsequent recovery, followed by global uncertainties, and finally the correction phase in 2025. By reviewing these six years of data, we can better understand which funds delivered consistently, which were more volatile, and what lessons investors can take away for the future.

The performance of midcap mutual funds is deeply tied to broader market conditions. To understand the numbers better, let's look at the economic and stock market backdrop year by year:

2020 – Pandemic Shock & Sharp Recovery

The year began with a global market crash due to the COVID-19 pandemic. Midcaps, being riskier than large caps, fell sharply. However, as stimulus packages and liquidity drove markets higher in the latter half, midcap funds staged a remarkable recovery by year-end.

2021 – Post-COVID Bull Run

This was one of the best years for midcaps. Corporate earnings rebounded, economic activity normalized, and investor optimism pushed midcap indices to record highs. Most midcap funds delivered stellar double-digit to 50%+ returns.

2022 – Inflation & Global Uncertainty

Markets cooled as inflation, rising interest rates, and global geopolitical concerns (including the Russia-Ukraine conflict) weighed on sentiment. Midcaps saw significant volatility, and returns were modest compared to the previous year.

2023 – Strong Rebound in Midcaps

Midcaps bounced back strongly, fueled by robust domestic demand, corporate growth, and investor confidence in India's growth story. The segment once again outperformed large caps in many months.

2024 – Growth Continues with Sector Rotation

Midcaps continued their upward journey, though gains were more sector-specific. Specific industries like manufacturing, financials, and capital goods attracted inflows, while others lagged. Returns remained healthy, but dispersion between funds widened.

2025 (YTD) – Correction & Volatility

The year started with some corrections as valuations became stretched and profit-booking kicked in. Global uncertainties also added pressure. While the long-term growth story for midcaps remains intact, 2025 has been more volatile so far.

One of the best ways to accumulate massive wealth in the long run is to invest your money in mid-cap funds. These funds are the perfect blend of high growth potential and moderate risk, which is why they appeal to those investors who are interested in investing beyond large-cap options only. Below, we present the six-year (2020–2025) performance data of the most reliable mid-cap funds to facilitate your selection of consistent performers.

For long-term investors, HDFC Mid Cap Fund, Edelweiss Mid Cap Fund, ICICI Prudential Midcap Fund, Invesco India Midcap Fund, and Nippon India Growth Mid Cap Fund stand out for consistent performance and relatively balanced risk. Investors willing to take higher risks for potentially higher rewards may consider Motilal Oswal Midcap Fund or Quant Mid Cap Fund, keeping in mind market volatility.

While mid-cap funds offer strong growth potential, not all funds perform consistently. Some show high volatility or underperform in multiple years, posing risks to investors who chase short-term gains.

1. Identifying Underperformers

Funds with weak or inconsistent returns can be risky for long-term wealth creation. Examples include:

• Taurus Mid Cap Fund: While it showed strong growth in 2020 (25.53%) and 2023 (38.38%), the fund underperformed in 2024 (11.32%), reflecting inconsistent performance.
• Mahindra Manulife Mid Cap Fund: Experienced highs like 49.77% in 2021, but very low returns in 2022 (0.23%) and a negative return in 2025 (-2.91%), showing a lack of stability.
• Motilal Oswal Midcap Fund: Extremely high spikes in some years, but severe decline in 2025 (-7.52%), highlighting its volatility.
• Quant Mid Cap Fund: Strong early returns (42.03% in 2020, 50.39% in 2021) followed by a sharp drop in 2025 (-7.38%), showing unpredictability.

2. Risks of Chasing Short-Term Returns

Investors often get tempted by funds delivering extraordinary returns in a single year. However, focusing solely on short-term performance can be risky:

• Volatility Risk: Funds with dramatic swings can erode capital in downturns, as seen in Motilal Oswal and Quant.
• Inconsistent Growth: High returns in one year don't guarantee future performance. Taurus and Mahindra Manulife show that past highs may be followed by poor years.
• Emotional Investing: Chasing "hot" funds based on short-term gains can lead to panic selling during corrections, reducing long-term wealth creation.

Mid-cap funds have historically delivered strong returns, but they come with inherent volatility. The 2025 market correction underscores the importance of patience and a long-term investment horizon.

When selecting funds, prioritize consistency, the fund manager's investment style, and your own risk appetite, rather than solely focusing on past returns. For more in-depth mutual fund research and insights, visit JezzMoney's AMC Research Portal.