Midcap, Smallcap Funds: Strong Profit Growth Could Keep Investor Flows Robust, But Valuations Matter

Mid-cap and small-cap funds continue to attract investor interest as corporate profitability remains stronger than large caps. In Q1, large-cap companies saw profit growth of around 9.5–10%, while mid caps grew about 20% and small caps delivered 34% year-on-year growth. Shweta Rajani, Mutual Fund Head, Anand Rathi Wealth, says the strong earnings performance could support continued flows into mid- and small-cap funds. For the full year, profit growth is expected at 12–13% for large caps, 18–20% for mid caps and 20–24% for small caps. However, higher valuations remain an important factor investors need to consider carefully while investing in these.