The allocation of assets under management (AUM) of flexicap schemes towards mid cap stocks has fallen from around 16-17% in the past three years to 14%- in 2025 as of November end, ACE MF data shows. This comes as the industry is expecting the large cap stocks to continue their outperformance amid concerns of overvaluation in the broader market stocks.
Meanwhile, the allocation to small caps has fallen from 11% in 2024 to 9% from January to November and that towards large caps have risen from 69% to 73%. However, market experts believe that midcaps may outperform both large and small caps.
Association of Mutual Funds in India (AMFI) data shows that the net assets under management of flexicap schemes were at Rs 5.45 lakh crore and made for 15.3%- the most– of the total equity AUM as of November end followed by thematic funds that constituted 15%. From December end last year, the flexicap AUM has risen 24.4%.
Midcaps Approach Historical Norms
According to Kunal Vora, head of India equity research at BNP Paribas, midcaps look slightly better compared to small caps as the premium of small caps is still elevated, while midcaps are now getting closer to the historical premium to the large caps.
He noted that small caps have historically traded at the discount to the Nifty but today it is still trading at around 20% premium. “We do like some of the smallcap names but have seen a euphoria in mid and small caps over the last five-six years, just looking at where they are right now compared to September 2024 does not make sense,” he said. He added that just because they have corrected from the peak, they are not screaming buys.
However, Harish Krishnan, CO-CIO and head of equity investments at Aditya Birla Sun Life AMC noted that while they prefer large caps, their flexi cap fund has slightly reduced allocation towards them in December. He said that putting money into overcrowded sectors such as capital goods and PSUs will lead to sharp disappointments and that opportunities exist in sectors like consumption.
Navigating the 2025 Market Correction
In 2025 the equity markets delivered worst returns in three years. The BSE Midcap index was up 1%, BSE Small Cap fell 6% and Sensex rose around 10%. The flexicap category one-year return has been 4.64%, three-year 17.23%, and five-year 15.49%.