Equity classes show distinct strengths in the long run
Large cap
The top 100 companies by market capitalisation form the large-cap universe. After leading returns across all categories in 2025, large caps entered a consolidation phase in early 2026. Their ranking slipped to third place, though the overall dispersion remains narrow, as no segment has meaningfully outperformed this year.
Mid cap
Mid-caps, comprising stocks ranked 101 to 250 by market capitalisation, top the rankings with marginal gains in early 2026. This reflects selective stock-picking and stronger earnings resilience compared to small-and microcaps. However, momentum is muted, with no clear signs of a decisive risk-on revival.
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Small cap
Stocks ranked 251 onward fall into the small-cap universe. Following selling pressure last year driven by stretched valuations and slowing earnings growth, the segment continues to lag in early 2026. Investor sentiment remains cautious, with limited appetite for high-beta and liquidity-sensitive names.
Micro cap
The micro-cap index, which includes the top 250 companies beyond the Nifty 500 constituents, was the weakest performer in 2025, ranking last among all segments. Interestingly, in early 2026, it moved up to the second place despite posting negative returns. While the major correction phase appears to have passed, conviction buying is still lacking. The segment could rebound disproportionately if macroeconomic clarity improves.
Long-term performance
Micro-caps have historically delivered the strongest long-term returns, driven by rapid earnings growth, operating leverage, and valuation re-rating as smaller businesses scaled during periods of economic formalisation and liquidity upcycles. They have also witnessed sharp and intermittent corrections. Mid-caps have benefited from business maturity, improving governance standards, and rising institutional participation, offering a balance between growth potential and relative stability. Large-caps have generated steadier but comparatively lower returns, as their size constrains high growth. However, they have provided resilience during periods of macroeconomic stress and risk-off phases.
*2026 data is YTD based on 10 February 2026 closing values. Other years’ returns are calculated between the first and the last trading day closing values. The 10-year return is compounded average return. Indices considered: Large-cap: Nifty-50 TRI, Midcap: Nifty Midcap 150 – TRI, Microcap: Nifty Microcap 250 – TRI, Smallcap: Nifty Smallcap 250 – TRI. Source: ACE MF.
