Small & midcap funds remain top bets for investors in first half of FY27

Investors have poured significant funds into small and mid-cap equity funds during the first half of fiscal year 2027, with their share of total equity inflows reaching a five-year high of 20%, according to Accord Fintech data. Small-cap funds attracted ₹42,212 crore and accounted for 22.6% of equity inflows, their peak percentage since the first half of fiscal year 2024.

Mid-cap funds received ₹38,043 crore, making up 20% of equity inflows, also a five-year high. Large-cap funds, on the other hand, saw a decline, receiving only ₹4,575 crore and contributing just 2% to total equity inflows. Higher returns have attracted investors to small and mid-cap funds; BSE 150 MidCap Index rose 1,877 points (13%), while BSE 250 SmallCap Index gained 1,349 points (24%).

Large-cap funds advanced 853 points (3.6%) and the Sensex rose 533 points (0.7%). Experts argue that strong inflows into mid- and small-cap funds do not necessarily imply expensive valuations; rather, corporate earnings growth is crucial in determining stock prices. Despite flows into mid and small caps, multiples have declined, not risen, according to Hari Shyamsunder, VP & Senior Institutional Portfolio Manager - India Equities at Templeton Global Investments.

Higher inflows have also increased the share of small and mid-cap funds in equity assets under management (AUM), reaching nearly 24% year-on-year to ₹9.8 lakh crore as of September 2026, accounting for 26% of equity AUM from 23.5% a year earlier.