Mid-cap vs small-cap funds: What alpha reveals about their performance – Taurus Mid Cap Fund among top laggards

Mid-cap and small-cap funds are equity mutual fund categories that invest predominantly in their respective market-cap segments. Under SEBI’s categorisation framework, both categories must invest at least 65% of their total assets in mid-cap or small-cap stocks, respectively.

Mid-cap stocks are generally considered less volatile than small-cap stocks, while small-cap stocks can offer higher growth potential but also come with greater risk. However, returns are not the only way to assess how a fund has performed against its benchmark. Alpha provides another important measure.

According to the latest AMFI July 2026 data, there are a total of 33 mid-cap funds and 36 small-cap funds.

Which mid-cap funds have the most negative alpha?

According to Value Research data, three mid-cap funds stand out for having the most negative alpha.

Taurus Mid Cap Fund had the most negative alpha at -5.38, indicating the largest underperformance against its benchmark in the category. UTI Mid Cap Fund and PGIM India Midcap Opportunities Fund followed with negative alphas of 3.33 and 3.24, respectively.

A negative alpha does not necessarily mean the fund delivered a negative return. It means the fund underperformed its benchmark after adjusting for market risk.

• Positive alpha: The fund has outperformed its benchmark.
• Zero alpha: The fund has broadly performed in line with its benchmark.
• Negative alpha: The fund has underperformed its benchmark.

For example, if a mid-cap fund’s benchmark delivered a 20% return while the fund generated 14.62%, its alpha would be -5.38%. This means the fund underperformed its benchmark by 5.38 percentage points after adjusting for market risk.

Which small-cap funds have the most negative alpha?

Tata Small Cap Fund recorded the lowest alpha at -1.70, followed by SBI Small Cap Fund at -1.20 and Kotak Small Cap Fund at -0.72.

Compared with the three mid-cap funds above, the negative alpha figures for these small-cap funds are less pronounced. This suggests that their underperformance relative to benchmarks was comparatively smaller.

Mid-cap vs small-cap: What does the category average show?

According to Value Research, the category average alpha for mid-cap funds is 1.15%, while the average alpha for small-cap funds is 2.89%.

A higher category-average alpha indicates that funds in the small-cap category generated more excess return over their benchmarks after adjusting for market risk than mid-cap funds during the period measured.

However, category averages can hide significant differences between individual schemes. As the fund-level data shows, some funds in both categories recorded negative alpha.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.