According to an analysis by FundsIndia, mid-caps have emerged as significant wealth creators in Indian equities over the past two decades. The Nifty Midcap 150 delivered a 20-year CAGR of 15.6%, substantially outperforming the Nifty 50's 12.5% CAGR. Small-caps also demonstrated strong performance with a CAGR of 13.1% over the same period. As reported by FundsIndia, mid-caps have outperformed large-caps by roughly 3 percentage points annually over the last two decades, creating significantly higher wealth for investors.
The analysis reveals that while mid-caps and small-caps generated higher long-term returns, investors faced significantly longer and deeper periods below previous market highs. According to FundsIndia's research, the Nifty Midcap 150 traded more than 20% below its previous peak on 28% of all trading days over the last 20 years. The Nifty Smallcap 250 experienced a substantially higher 46% of trading days below previous peaks. For deeper corrections, small-caps spent 36% of all trading days more than 30% below their previous highs. As noted by FundsIndia, a 20-year period covers roughly 5,000 trading sessions, meaning mid-caps spent the equivalent of more than five years trading at least 20% below previous peaks.
The data reveals a significant disconnect between return numbers and actual investor experience. While mid-caps and small-caps ultimately outperformed large-caps over the last two decades, they spent a substantial share of that period recovering from earlier declines. According to FundsIndia's analysis, the gap in returns was considerably smaller than the gap in drawdown experience. Mid-caps outperformed large-caps by 3.1 percentage points annually, yet the difference in time spent below previous peaks was far more pronounced. This explains why return numbers and investor experience can often tell different stories, as CAGR captures final outcomes while drawdown data captures how frequently portfolios remained below earlier highs during the investment journey.
