Banner image

Large Cap, Mid Cap and Small Cap Funds: What’s the Difference? 

6 min read • Updated 30 January 2023
Written by Vaibhav Khandelwal
Large Cap, Mid Cap and Small Cap Funds: What’s the Difference?

Caption: Learn the difference between large-cap, mid-cap and small-cap mutual funds 

The most prominent indices, such as NIFTY 50 and S&P BSE Sensex, rank companies according to their market capitalisation. To calculate a company’s market cap, you need to multiply its current market price by the total number of its outstanding shares. Securities and Exchange Board of India (SEBI), via its circular on the rationalisation of mutual funds, divides all companies into three categories – large-cap, mid-cap and small-cap. 

In this regard, mutual funds which invest in companies based on their market capitalisation are called large, mid and small-cap funds. Continue reading to learn the difference between these funds.

What Is a Large Cap Fund?

Large-cap funds are mutual funds that invest in the top 100 companies based on market cap. 

As per SEBI’s guidelines, large-cap funds have to invest 80% of their assets into such companies. Large-cap companies offer stability in a volatile market and tend to generate a stable return in the long run. 

However, the growth of these companies tends to be slow  as they are relatively well-established. Hence, large-cap funds usually do not offer aggressive returns.  

List of Top Large Cap Funds to Invest in India

Here are some of the top large cap funds that you can invest in 2022:

Name of the Fund3 Year CAGR (%)*5 Year CAGR (%)*
Canara Robeco Bluechip Equity Fund – Direct Plan – Growth18.6015.94
Axis Bluechip Fund – Direct Plan – Growth13.6414.53
Edelweiss Large-Cap Fund – Direct Plan – Growth17.0414.06
Baroda BNP Paribas Large-Cap Fund – Direct Plan – Growth16.5213.79
Kotak Bluechip Fund – Direct Plan – Growth17.6013.75

*Returns data valid as of November 16, 2022. 

What Is a Mid Cap Fund?

Mid-cap mutual funds invest in mid-cap companies that rank from 101 to 250 based on market cap. These funds should  invest at least 65% of their assets in such companies. 

Although mid-cap companies are riskier than large-cap companies, they carry relatively lower risks than small-cap companies. As mid-cap companies have room for growth and development, they have higher growth potential than large-cap companies.

List of Top Mid Cap Funds to Invest in India

Here are some of the best mid cap funds to invest in 2022:

Name of the Fund3 Year CAGR (%)*5 Year CAGR (%)*
Quant Mid-Cap Fund – Direct Plan – Growth36.98%21.76
PGIM India Midcap Opportunities Fund – Direct Plan – Growth38.13%20.11
Axis Midcap Fund – Direct Plan – Growth21.5117.67
Motilal Oswal Midcap Fund – Direct Plan – Growth25.88%16.30
Edelweiss Mid-Cap Fund – Direct Plan – Growth28.0316.08

*Returns data valid as of November 16, 2022. 

What Is a Small Cap Fund?

Small-cap funds are mutual funds that primarily invest in small-cap companies. According to SEBI, these funds should invest a minimum of 65% of their assets in companies that rank 251 onwards based on market cap.

Small-cap companies tend to be riskier than large-cap and mid-cap companies, as they are comparatively new to the market and have fewer assets under management. Hence, they possess higher risk. 

However, these companies also have higher growth potential than large-cap and mid-cap companies. Therefore, it has the potential to generate better returns. 

List of Top Small Cap Funds to Invest in India

Here are some of the best small cap funds that you can invest in  :

Name of the Fund3 Year CAGR (%)*5 Year CAGR (%)*
Quant Small-Cap Fund – Direct Plan – Growth52.7823.41
Axis Small-Cap Fund – Direct Plan – Growth28.6820.30
Kotak Small-Cap Fund – Direct Plan – Growth33.98%18.27
Nippon India Small-Cap Fund – Direct Plan – Growth35.3118.12
Union Small-Cap Fund – Direct Plan – Growth31.3115.54

*Returns data valid as on November 16, 2022. 

What Are the Differences Between Large Cap, Mid Cap and Small Cap Funds?

These funds have different objectives based on their asset allocations. The primary differences between large, mid, and small-cap funds are discussed below.

ParametersLarge-Cap FundsMid-Cap FundsSmall-Cap Funds
ReturnsThese funds offer stable but moderate returns.These funds offer higher returns than large-cap funds but not as high as small-cap funds.Such funds have the potential to offer relatively higher returns due to the higher growth potential of small-cap stocks.
VolatilityLarge-cap funds are relatively stable and are not volatile in general.These funds are moderately volatile but more stable than small-cap funds.Small Cap Funds are highly volatile.
RiskThese funds have significantly lower risk than other funds. In addition, they are reliable in a falling market.Mid-cap funds are less risky than small-cap funds.These funds have a high-risk factor and are suitable for investors with a high-risk appetite.
LiquidityLarge-cap funds provide high liquidity.These funds offer moderately lower liquidity than large-cap funds.Small-cap funds have relatively lower liquidity.

Who Should Invest in Large Cap, Mid Cap and Small Cap Funds?

Now that we have discussed the differences between the three types of funds is clear, let’s understand the fund that might suit you the best:  

  • Large-cap funds

Investors having a low-risk appetite and long-term investment horizon can consider investing in these funds. It is also ideal for investors who wish to diversify their portfolios to balance the risk ratio.

  • Mid-cap funds

Investors who want to take moderate risks but expect a higher return during a medium to long investment tenure can consider investing in such funds. They can also prove to be good portfolio diversifiers.

  • Small-cap funds

Active investors having a high-risk appetite and wanting to earn a maximum return through significant investment can invest in funds of this category.

Final Thoughts

Large, mid, and small-cap funds have different characteristics in terms of  their risk factor, investment objective, growth prospect, etc. Investors should check whether the nature of the underlying assets of these funds aligns with their investment objectives before going ahead with any decision.  

Frequently Asked Questions (FAQs)

Q1. What is the formula to calculate market capitalisation of a company?

Ans. The formula to calculate a company’s market capitalisation is the total number of outstanding shares multiplied by the price per share. For example, if the total outstanding shares of a company is 20,000 and the cost per share is ₹100, the company’s market capitalisation would be 20,000 x ₹100 = ₹20,00,000.

Q2. What is a Bluechip fund?

Ans. The bluechip fund is another term used for large-cap funds. Blue Chip companies are the ones with good reputations and solid market capitalisations. These companies are considered reliable and stable investment options. Usually, the stocks of the highest-ranking companies based on the market cap are blue chip companies.

Q3. What are the capitalisation-based indices in the Indian Stock Market?

Ans. Some indices that rank the large-cap companies in India are SENSEX, NIFTY 50, NIFTY 100 and NIFTY Next 50. On the other hand, NIFTY Mid-Cap and NIFTY Mid-Cap 150 focus on mid cap companies. Similarly, small-cap companies get ranked in NIFTY Small-Cap and NIFTY Small-Cap 250. NIFTY 500 is one such index that comprises large-cap, mid-cap and small-cap stocks.

Q4. What do you mean by the risk appetite of an investor? 

Ans. The risk appetite is the level of risk you are willing to take to achieve your desired return goals. Investors with a high-risk appetite tend to go for risky investment avenues to generate high returns quickly.

Was this helpful?

Vaibhav Khandelwal

Credit Principal
Vaibhav is Chartered Accountant by profession, having experience of 4+ years in banking & finance sector. Since past one year associated with Wint Wealth as Credit Principal. Previously worked with Northern Arc Capital for 2 years in FI-Credit Team and AU Small Finance Bank for 1 year in LAP-Credit Team.

Popular Articles

Sovereign Gold Bond 2023-24: Series 4; Check Price, Issue Dates, and More.
Sovereign Gold Bond 2023-24: Series 4; Check Price, Issue Dates, and More.
  • 12 min read
  • 15 June 2023
What Are Gold BeES and How Do They Work?
What Are Gold BeES and How Do They Work?
  • 6 min read
  • 12 January 2023
Difference between Visa Classic, Platinum, Signature and Infinite Cards
Difference between Visa Classic, Platinum, Signature and Infinite Cards
  • 6 min read
  • 29 March 2023
Details of Rental Income Taxation in India 2022 -2023
How is rental income taxed in India? (2023-24)
  • 12 min read
  • 6 December 2022
How to File a Complaint with the Banking Ombudsman: A Step-by-Step Guide
How to File a Complaint with the Banking Ombudsman: A Step-by-Step Guide
  • 12 min read
  • 28 February 2023

Recent Articles

NPS Withdrawal Online: Rules, Process, Taxation & Exceptions
NPS Withdrawal Online: Rules, Process, Taxation & Exceptions
  • 9 min read
  • 31 January 2024
Understand Exempt-Exempt-Exempt (EEE) In Income Tax In India
Understand Exempt-Exempt-Exempt (EEE) In Income Tax In India
  • 4 min read
  • 31 January 2024
Electoral Bonds: Meaning, Price, and Eligibility
Electoral Bonds: Meaning, Price, and Eligibility
  • 8 min read
  • 29 January 2024
Interim Budget: How Is It Different From a Union Budget
Interim Budget: How Is It Different From a Union Budget
  • 4 min read
  • 29 January 2024
What Is Tax Evasion, Tax Avoidance, and Tax Planning?
What Is Tax Evasion, Tax Avoidance, and Tax Planning?
  • 5 min read
  • 25 January 2024