Large-cap mutual funds are increasingly shifting a portion of their portfolios toward mid-cap stocks, reflecting growing confidence in India's broader market opportunities. According to data from Elara Capital, large-cap schemes increased their allocation to mid-cap stocks to 9.2% of assets under management (AUM) in May 2026, up from 7.5% a year earlier. At the same time, exposure to large-cap stocks declined slightly to 84.3% from 84.9%.
The move suggests fund managers are looking beyond traditional blue-chip companies and identifying attractive growth opportunities in the mid-cap segment. Mid-cap companies are generally considered to have higher growth potential compared to mature large-cap firms, although they also carry relatively higher risk.
Several large-cap mutual fund schemes significantly increased their mid-cap allocations during the one-year period from May 2025 to May 2026.
Among the top funds increasing mid-cap exposure were:
• HDFC Large Cap Fund increased its mid-cap allocation by 8.46% while reducing large-cap exposure by 7.44%.
• Sundaram Large Cap Fund raised mid-cap allocation by 6.63% and cut large-cap holdings by 4.44%.
• Aditya Birla Sun Life Large Cap Fund increased mid-cap exposure by 5.98% while reducing large-cap allocation by 3.28%.
• Franklin India Large Cap Fund increased mid-cap holdings by 4.72% and lowered large-cap exposure by 4.59%.
• Baroda BNP Paribas Large Cap Fund increased mid-cap allocation by 3.52%.
Other notable schemes that raised mid-cap exposure include DSP Large Cap Fund, Motilal Oswal Large Cap Fund, Invesco India Large Cap Fund, ICICI Prudential Large Cap Fund, UTI Large Cap Fund, LIC MF Large Cap Fund, Nippon India Large Cap Fund, SBI Large Cap Fund, and Kotak Large Cap Fund.
Interestingly, some fund houses increased exposure to both large-cap and mid-cap stocks simultaneously. DSP Large Cap Fund increased large-cap allocation by 7.09% while also raising mid-cap exposure by 3.32%. LIC MF Large Cap Fund and JM Large Cap Fund also showed increases in both categories.
The trend highlights a growing preference among fund managers to diversify portfolios and capture opportunities across market capitalizations. Mid-cap companies have delivered strong earnings growth in several sectors over the last few years, making them attractive investment candidates despite concerns over valuations.
Market experts believe that the gradual increase in mid-cap exposure indicates confidence in India's economic growth outlook and corporate earnings potential. Fund managers appear to be positioning portfolios to benefit from long-term growth themes while maintaining the core stability provided by large-cap stocks.
However, investors should note that higher mid-cap exposure may increase portfolio volatility during periods of market correction. While mid-cap stocks can generate superior returns over the long term, they often experience sharper price movements compared to large-cap companies.
The latest data indicates that large-cap fund managers are increasingly willing to take selective exposure to mid-cap stocks, signaling optimism about future growth opportunities in India's equity markets.
Disclaimer:
The information provided in this article is for informational and educational purposes only and should not be considered as investment advice, financial advice, or a recommendation to buy, sell, or hold any securities. Mutual fund investments are subject to market risks, and past performance is not indicative of future results.
The data and information presented in this article have been sourced from publicly available reports and reliable third-party sources believed to be accurate at the time of publication. However, we do not guarantee the completeness, accuracy, or reliability of the information. Investors are advised to conduct their own research and consult a qualified financial advisor before making any investment decisions.
