Investing in mid-, small-cap funds? Investors must tread with caution

Barring the past few months, small-cap and mid-cap funds outperformed significantly, compared to other categories until the start of calendar year 2022

The recent correction in Indian equities has led to mid-cap and small-cap funds underperforming, weighed against large-cap funds. Participants in the mutual fund (MF) industry observe that the worst is not behind us, and investors must tread with caution.

The data from Value Research reveals that in the past month, mid-cap and small-cap funds have on average fallen 7.54 per cent and 9.77 per cent, respectively. Large-cap funds, however, have delivered negative returns of 5.33 per cent in the same time frame. Expectations of further rate hikes in the months to come and high inflation are likely to keep mid-cap