The Performance Paradox of Indian Large, Mid and Small Cap Funds

Abstract

This paper evaluates managerial skill across Indian Large, Mid, and Small Cap mutual funds using risk-adjusted metrics and the Carhart Four-Factor model. Findings indicate that most outperformance is driven by systematic Size and Value premiums rather than idiosyncratic alpha. Motilal Oswal Midcap was the only fund to demonstrate statistically significant managerial skill, while others relied on market momentum. Results suggest the Momentum factor adds little explanatory power, making the Fama-French Three-Factor model sufficient for this period. The study concludes that Mid-Cap funds offer superior efficiency, though structural characteristics are better predictors of success than past returns.