When it comes to building long-term wealth through systematic investment plans (SIPs), choosing the right mutual fund can make all the difference between moderate returns and life-changing wealth creation. Today, we’re diving deep into three powerhouse funds that have been on every serious investor’s radar: Quant Small Cap Fund, Nippon India Small Cap Fund, and Motilal Oswal Midcap Fund. But which one truly delivered the most wealth over the past decade? Let’s find out.
Why This Comparison Matters
Over the last decade, Indian equity markets have witnessed remarkable growth, creating millionaires out of disciplined SIP investors. Small and mid-cap funds, in particular, have been the dark horses of wealth creation, often outperforming their large-cap counterparts by significant margins. However, this outperformance comes with higher volatility and requires patient capital.
The three funds we’re comparing today represent the best in their categories, each with a loyal following and proven track records. Understanding their performance, portfolio composition, and risk-return profiles can help you make informed investment decisions.
The Contenders: A Detailed Overview
1. Quant Small Cap Fund (Direct Plan)
Fund Basics:
- Launch Date: January 7, 2013
- Current NAV: ₹272.26 (as of August 2025)
- AUM: ₹29,462 Crores
- Expense Ratio: 0.71%
- Fund Manager: Managed by Quant’s experienced team
- Risk Level: Very High
- Benchmark: S&P BSE Small Cap Total Return Index
Investment Philosophy: Quant Small Cap Fund is known for its aggressive, concentrated portfolio approach. The fund doesn’t shy away from taking bold bets and often holds positions that other funds might consider too risky. This strategy has paid rich dividends during bull markets but has also led to significant drawdowns during corrections.
Top Holdings Analysis: The fund’s current portfolio reveals an interesting mix:
- Reliance Industries Ltd: 9.23%
- Jio Financial Services Ltd: 6.76%
- RBL Bank Ltd: 3.98%
- Aegis Logistics Ltd: 3.22%
- Bikaji Foods International Ltd: 2.86%
Sectoral Allocation:
- Specialized Finance: 10.91%
- Pharmaceuticals: 9.54%
- Oil & Gas – Refining & Marketing: 9.23%
- Real Estate: 5.77%
- Private Banks: 5.29%
Risk Metrics:
- Alpha Ratio: 5.34 (strong outperformance)
- Standard Deviation: 17.99 (high volatility)
- Sharpe Ratio: -0.71 (recent negative risk-adjusted returns)
- Portfolio P/E: 31.40 vs Category P/E: 34.12
2. Nippon India Small Cap Fund (Direct Plan)
Fund Basics:
- Category: Small Cap Equity
- AUM: Significant scale with ₹13,990 Cr added recently
- Expense Ratio: Competitive within category
- Fund Manager: Experienced team with strong research capabilities
- Risk Level: Very High
- Benchmark: S&P BSE 250 Small Cap Total Return Index
Investment Philosophy: Nippon India Small Cap Fund follows a bottom-up stock selection approach, focusing on companies with strong fundamentals, scalable business models, and competent management. The fund emphasizes quality over pure value, which has helped it maintain relatively better downside protection during market corrections.
What Makes It Different: This fund has built a reputation for consistent performance across market cycles. The fund house’s robust research infrastructure and disciplined investment process have resulted in a portfolio that balances growth and stability. The recent addition of nearly ₹14,000 crores in AUM speaks volumes about investor confidence.
Portfolio Characteristics:
- Diversified across sectors to reduce concentration risk
- Focus on emerging market leaders rather than just cheap stocks
- Strong emphasis on corporate governance and management quality
- Regular portfolio rebalancing to book profits and manage risk
3. Motilal Oswal Midcap Fund (Direct Plan)
Fund Basics:
- Category: Mid Cap Equity
- AUM: ₹34,779.74 Crores (as of September 2025)
- Expense Ratio: 0.69% (among the lowest in category)
- Fund Manager: Expert team with proven mid-cap expertise
- Risk Level: High (lower than small caps)
- Alpha Ratio: 7.16 (exceptional outperformance)
- Benchmark: Nifty Midcap 150 Total Return Index
Investment Philosophy: Motilal Oswal Midcap Fund combines growth and value investing principles, identifying mid-cap companies with strong competitive advantages and reasonable valuations. The fund’s philosophy centers on finding “growth at reasonable prices” (GARP) rather than chasing momentum or buying solely based on valuation.
Strategic Advantage: Mid-cap companies offer a sweet spot in the market cap spectrum. They’re large enough to have established business models and professional management but small enough to deliver high growth rates. This fund capitalizes on this opportunity with precision stock selection and active portfolio management.
Why It Stands Out:
- Impressive alpha of 7.16 indicates consistent benchmark outperformance
- Lower expense ratio of 0.69% means more returns in investors’ pockets
- Massive AUM of over ₹34,000 crores demonstrates strong investor trust
- Mid-cap focus offers better liquidity than small caps during volatile periods
Performance Comparison: The Numbers That Matter
5-Year Returns (Annualized)
- Quant Small Cap Fund: 35.51% ⭐
- Motilal Oswal Midcap Fund: 33.39%
- Nippon India Small Cap Fund: 33.21%
3-Year Returns (Annualized)
- Motilal Oswal Midcap Fund: 27.03% ⭐
- Quant Small Cap Fund: 25.72%
- Nippon India Small Cap Fund: 22.97%
1-Year Returns
- Motilal Oswal Midcap Fund: Relatively stable
- Nippon India Small Cap Fund: Moderate volatility
- Quant Small Cap Fund: -9.44% (reflecting recent market correction)
Rolling Returns Analysis
Understanding rolling returns is crucial because it shows consistency across different time periods, not just one specific timeframe.
Why Rolling Returns Matter:
- Point-to-point returns can be misleading based on market timing
- Rolling returns show performance across all possible investment periods
- Helps identify consistent performers vs one-time wonders
While specific 10-year rolling returns data requires detailed analysis, the consistent 3-year and 5-year performance of all three funds suggests sustained quality management and sound investment processes.
The 10-Year Wealth Creation Story: Real Numbers, Real Impact
Let’s calculate what a disciplined SIP investor would have earned with these funds. We’ll look at multiple scenarios to understand the true wealth creation potential.
Scenario 1: Monthly SIP of ₹10,000 for 10 Years
Quant Small Cap Fund:
- Total Investment: ₹12,00,000
- Assuming average CAGR of 32-33% (extrapolating 5-year data): ~₹35-38 lakhs
- Wealth Gain: ₹23-26 lakhs
- Absolute Return: ~200%+
Nippon India Small Cap Fund:
- Total Investment: ₹12,00,000
- Assuming average CAGR of 30-31%: ~₹32-34 lakhs
- Wealth Gain: ₹20-22 lakhs
- Absolute Return: ~170-180%
Motilal Oswal Midcap Fund:
- Total Investment: ₹12,00,000
- Assuming average CAGR of 30-32%: ~₹32-35 lakhs
- Wealth Gain: ₹20-23 lakhs
- Absolute Return: ~170-190%
Scenario 2: Monthly SIP of ₹25,000 for 10 Years
Quant Small Cap Fund:
- Total Investment: ₹30,00,000
- Estimated Corpus: ₹87-95 lakhs
- Wealth Gain: ₹57-65 lakhs
Nippon India Small Cap Fund:
- Total Investment: ₹30,00,000
- Estimated Corpus: ₹80-85 lakhs
- Wealth Gain: ₹50-55 lakhs
Motilal Oswal Midcap Fund:
- Total Investment: ₹30,00,000
- Estimated Corpus: ₹81-87 lakhs
- Wealth Gain: ₹51-57 lakhs
The Power of Compounding Illustrated
What’s truly remarkable is how the power of compounding accelerates wealth in the later years. In the first 5 years, your ₹10,000 monthly SIP would grow to approximately ₹11-12 lakhs. But in the next 5 years, it could nearly triple to ₹35-38 lakhs in high-performing funds like Quant Small Cap.
This exponential growth is why financial advisors emphasize staying invested for the long term and never timing the market.
Deep Dive: What Sets Them Apart
Quant Small Cap Fund: The Aggressive Wealth Creator
Strengths:
- Exceptional Long-term Performance: Leading 5-year returns at 35.51%
- Bold Portfolio Strategy: Concentrated bets on high-conviction stocks
- Strong Alpha Generation: Alpha of 5.34 shows consistent benchmark outperformance
- Unique Stock Selection: Often finds opportunities others miss
- Relatively Lower P/E: At 31.40 vs category 34.12, offers value despite strong performance
Challenges:
- High Volatility: Standard deviation of 17.99 means significant ups and downs
- Recent Underperformance: -9.44% in 1-year returns reflects sensitivity to market corrections
- Negative Sharpe Ratio: Current Sharpe of -0.71 indicates poor recent risk-adjusted returns
- Concentrated Portfolio: Top holdings heavily weighted, increasing single-stock risk
Ideal Investor Profile:
- Age: Under 40 with long investment horizon (10+ years)
- Risk Tolerance: High to very high
- Investment Goal: Wealth maximization, not capital preservation
- Market Knowledge: Experienced investors who won’t panic during 20-30% drawdowns
- Portfolio Allocation: Should not exceed 15-20% of total equity portfolio
Investment Strategy: Consider starting an SIP during market corrections when the NAV has declined. The fund’s aggressive approach means it bounces back strongly during recoveries. Investors should have the conviction to increase SIPs during market dips rather than stopping them.
Nippon India Small Cap Fund: The Balanced Outperformer
Strengths:
- Consistent Track Record: Solid performance across multiple market cycles
- Strong AUM Growth: ₹13,990 Cr recent addition shows investor confidence
- Quality Focus: Emphasis on fundamentally strong companies
- Better Downside Protection: Relatively lower drawdowns during corrections
- Diversified Portfolio: Reduced concentration risk compared to peers
Challenges:
- Middle-of-the-Pack Returns: Not the highest performer in any single period
- Large AUM Concerns: Very large AUM can limit agility in small-cap space
- Conservative Approach: May miss out on some high-risk, high-reward opportunities
Ideal Investor Profile:
- Age: 30-50 with 7-10 year investment horizon
- Risk Tolerance: Moderate to high
- Investment Goal: Above-average returns with relatively better stability
- Market Knowledge: First-time small-cap investors or those who prefer proven track records
- Portfolio Allocation: Can form 20-25% of equity portfolio
Investment Strategy: This fund works best for systematic, disciplined SIPs without timing the market. Its consistent performance means it’s less likely to disappoint during any specific period, though it may not give spectacular returns like more aggressive funds.
Motilal Oswal Midcap Fund: The Sweet Spot Winner
Strengths:
- Best 3-Year Returns: Leading at 27.03%, showing recent strong momentum
- Exceptional Alpha: 7.16 alpha indicates superior fund management
- Low Expense Ratio: At 0.69%, among the most cost-efficient
- Huge Investor Base: ₹34,779 Cr AUM demonstrates widespread trust
- Better Liquidity: Mid-caps offer better exit options than small caps
- Lower Volatility: Compared to small caps, offers smoother return journey
Challenges:
- Mid-cap Limitations: May not capture the explosive growth of small caps
- Large AUM Impact: Very large AUM could affect future return potential
- Benchmark Dependency: Mid-cap index movements significantly impact returns
Ideal Investor Profile:
- Age: 25-55 with 5-10 year investment horizon
- Risk Tolerance: Moderate to high
- Investment Goal: Strong growth with lower volatility than small caps
- Market Knowledge: Suitable for beginners to experienced investors
- Portfolio Allocation: Can form 25-30% of equity portfolio
Investment Strategy: Motilal Oswal Midcap is an excellent core equity holding. Its balance of growth and stability makes it suitable for larger portfolio allocations. Investors can combine this with large-cap funds for a complete equity portfolio without needing small-cap exposure.
Volatility Analysis: The Road Less Talked About
Returns are only half the story. The journey to those returns – how smooth or bumpy it is – significantly impacts investor experience and behavior.
Understanding Drawdowns
A drawdown is the decline from a peak to a trough. During the 2020 COVID crash, even the best funds saw 40-50% drawdowns. Here’s how each fund likely handled it:
Small-Cap Funds (Quant & Nippon India):
- Typical drawdown during major corrections: 40-55%
- Recovery time: 12-18 months
- Investor impact: Requires strong conviction to hold
Mid-Cap Fund (Motilal Oswal):
- Typical drawdown during major corrections: 30-45%
- Recovery time: 10-15 months
- Investor impact: Relatively easier to hold through volatility
The Psychological Factor
Many investors abandon their SIPs precisely when they should be doubling down. If you had started a ₹10,000 SIP in January 2020, here’s what you would have experienced:
- January-February 2020: Normal growth
- March 2020: Your portfolio would be down 40-50%
- April-October 2020: Slow recovery, portfolio still in red
- November 2020 onwards: Explosive growth
- By December 2021: Portfolio would be up 80-100%
Those who stopped SIPs in March-April 2020 missed out on buying at the lowest prices, which is where the real wealth was created.
Tax Implications: What You Need to Know
Understanding taxation helps calculate post-tax returns, which is what actually matters.
Current Equity Mutual Fund Taxation (As of 2025)
Short-Term Capital Gains (STCG):
- Holding Period: Less than 12 months
- Tax Rate: 20%
Long-Term Capital Gains (LTCG):
- Holding Period: 12 months or more
- Tax Rate: 12.5% on gains above ₹1.25 lakhs per year
- First ₹1.25 lakhs of LTCG: Tax-free
Tax Efficiency Example
If you invested ₹12 lakhs via SIP over 10 years and built a corpus of ₹35 lakhs:
- Gain: ₹23 lakhs
- First ₹1.25 lakhs: Tax-free
- Remaining ₹21.75 lakhs: Taxed at 12.5% = ₹2.72 lakhs
- Post-tax gain: ₹20.28 lakhs
- Post-tax corpus: ₹32.28 lakhs
This is still significantly better than fixed deposits or other traditional investments!
Portfolio Construction: How to Use These Funds
Strategy 1: Single Fund Approach
Best for: Investors who want simplicity
- Choose Motilal Oswal Midcap for balanced growth
- Allocate 25-30% of equity portfolio
- Complement with large-cap index fund
Strategy 2: Dual Fund Approach
Best for: Investors seeking diversification
- 60% Motilal Oswal Midcap (stability)
- 40% Quant Small Cap (aggressive growth)
- Total allocation: 30-35% of equity portfolio
Strategy 3: Triple Fund Approach
Best for: Sophisticated investors
- 40% Motilal Oswal Midcap
- 30% Nippon India Small Cap
- 30% Quant Small Cap
- Total allocation: 35-40% of equity portfolio
Strategy 4: Life-Stage Based Allocation
Age 25-35 (Aggressive Phase):
- 50% Quant Small Cap
- 50% Motilal Oswal Midcap
Age 35-45 (Growth Phase):
- 60% Motilal Oswal Midcap
- 40% Nippon India Small Cap
Age 45-55 (Consolidation Phase):
- 70% Motilal Oswal Midcap
- 30% Nippon India Small Cap
- Consider reducing overall allocation
When to Review and Rebalance
Annual Review Checklist
- Performance Check: Compare against benchmark and peer funds
- Portfolio Drift: Has your allocation changed significantly?
- Life Stage: Has your risk profile changed?
- Goal Progress: Are you on track for your financial goals?
Red Flags to Watch
Consider Exiting or Reducing If:
- Fund consistently underperforms benchmark for 3+ years
- Multiple changes in fund management team
- Drastic change in investment philosophy
- Excessive increase in expense ratio
- You need the money within 3 years
Never Exit Based On:
- Short-term underperformance (1-2 quarters)
- Market crash (this is when you should invest more)
- Media noise or friend’s advice
- Single year of negative returns
The Verdict: Which Made Investors Richest?
Based on comprehensive analysis of 5-year and 3-year performance data, here’s the final ranking:
🏆 Winner: Quant Small Cap Fund
10-Year Wealth Creation (Estimated): ₹35-38 lakhs on ₹12 lakh investment
With the highest 5-year returns at 35.51%, Quant Small Cap Fund emerges as the absolute wealth creator. Investors who had the courage to stay invested through volatility were handsomely rewarded. However, this came with significant bumps along the way.
Key Takeaway: Maximum wealth, maximum volatility. Only for strong-hearted investors.
🥈 Runner-Up: Motilal Oswal Midcap Fund
10-Year Wealth Creation (Estimated): ₹32-35 lakhs on ₹12 lakh investment
Coming in a close second, Motilal Oswal Midcap offers the best risk-adjusted returns. Its impressive alpha of 7.16 and consistent performance across different time periods make it the most reliable choice for wealth creation without extreme volatility.
Key Takeaway: Near-maximum wealth with notably lower stress. The smart money’s choice.
🥉 Third Place: Nippon India Small Cap Fund
10-Year Wealth Creation (Estimated): ₹32-34 lakhs on ₹12 lakh investment
Nippon India Small Cap delivers solid, consistent performance with better downside protection. While it doesn’t top the charts in any single period, its stability and proven track record make it a dependable choice.
Key Takeaway: Steady wealth creation with time-tested consistency.
The Reality Check: What Financial Advisors Won’t Tell You
1. Past Performance Is Overrated
All three funds performed exceptionally well over the past 10 years. The next 10 years could be entirely different. Market conditions, fund management changes, and economic cycles can dramatically alter performance.
2. Timing Matters More Than You Think
An investor who started SIP in 2013 experienced very different returns than someone who started in 2020. Starting during market lows accelerates wealth creation significantly.
3. Most Investors Don’t Get Average Returns
Due to behavioral biases – stopping SIPs during crashes, redeeming during peaks – most investors earn 3-5% less than the fund’s official returns. Discipline is more important than fund selection.
4. Diversification Is Not Optional
Putting all your money in one fund, no matter how good, is risky. These funds should be part of a diversified portfolio, not the entire portfolio.
5. The Best Fund Is the One You’ll Stick With
A fund giving 30% returns that you’ll stay invested in is better than a fund giving 35% returns that you’ll abandon during a 40% drawdown.
Common Mistakes to Avoid
1. Chasing Last Year’s Top Performer
Just because a fund was #1 last year doesn’t mean it will repeat. Focus on 5-7 year track records, not recent performance.
2. Stopping SIP During Market Crashes
This is when you should be increasing, not stopping. Market crashes are sales, not catastrophes.
3. Over-Allocating to Small/Mid Caps
Don’t put more than 40% of your equity portfolio in these high-risk categories. Balance with large-cap funds.
4. Ignoring Exit Load and Taxes
Frequent switching between funds costs you exit loads and tax inefficiency. Stick with good funds for the long term.
5. Checking Portfolio Daily
This increases anxiety and leads to poor decisions. Check quarterly or semi-annually at most.
Expert Recommendations by Investor Type
For Beginners (First-time SIP investors)
Recommended: Motilal Oswal Midcap Fund Why: Lower volatility, consistent performance, easier to hold during downturns
For Aggressive Investors (High risk tolerance)
Recommended: 60% Quant Small Cap + 40% Motilal Oswal Midcap Why: Maximum wealth creation potential with some stability
For Conservative Investors (Lower risk tolerance)
Recommended: 70% Motilal Oswal Midcap + 30% Large Cap Index Fund Why: Growth with safety, suitable for those who need to sleep well
For Experienced Investors (Market-savvy, long-term oriented)
Recommended: 40% each in Quant & Nippon Small Cap + 20% Motilal Midcap Why: Diversified small-mid cap exposure, captures different management styles
Future Outlook: What to Expect in Next 5-10 Years
Small-Cap Prospects
After recent corrections, small caps offer attractive valuations. However, they’re sensitive to:
- Interest rate changes
- Economic slowdowns
- Liquidity conditions
- FII/DII flows
Mid-Cap Prospects
Mid-caps are in a sweet spot with:
- Many companies graduating from small to mid-cap
- Better resilience than small caps
- Still significant growth runway
- Improving corporate governance
Market Rotation Theory
Markets rotate between large, mid, and small caps. After the recent small-cap rally and correction, the next 2-3 years might favor mid-caps and quality small-caps over indiscriminate small-cap buying.
Action Plan: Getting Started Today
Step 1: Assess Your Risk Profile
- Can you handle 40-50% portfolio decline without panic?
- Is your investment horizon 7+ years?
- Do you have an emergency fund in place?
Step 2: Decide Your Allocation
Based on risk profile, decide between:
- Conservative: 100% Motilal Oswal Midcap
- Moderate: 70% Motilal + 30% Nippon Small Cap
- Aggressive: 50% Quant + 50% Motilal
Step 3: Set Up Your SIP
- Start with an amount you’re comfortable with
- Choose monthly SIP date after your salary credit
- Set up automatic payment to ensure consistency
Step 4: Plan for Increments
- Increase SIP by 10-15% annually (step-up SIP)
- Add lumpsum during market corrections
- Never reduce or stop SIP during downturns
Step 5: Review Annually
- Check performance against benchmark
- Rebalance if allocation drifts significantly
- Stay patient and trust the process
FAQs
Q1: Can I invest in all three funds simultaneously? Yes, but ensure your total exposure to small and mid-cap doesn’t exceed 40% of your equity portfolio.
Q2: What if I need money in 3-5 years? These funds are not suitable for short-term goals. Consider debt funds or hybrid funds for 3-5 year goals.
Q3: Should I invest lumpsum or SIP? SIP is always recommended for equity funds as it averages out costs and removes timing risk.
Q4: Can I switch from one fund to another? Yes, but it triggers capital gains tax. Better to redirect future SIPs than to switch existing investments.
Q5: What happens if fund manager changes? Monitor performance for 1-2 quarters post-change. If consistency remains, continue. If deteriorates significantly, consider alternatives.
Final Thoughts: The Wealth Creation Mindset
Building wealth through SIPs isn’t just about choosing the right fund – it’s about developing the right mindset:
- Patience Over Passion: Wealth compounds slowly, then suddenly
- Discipline Over Timing: Regular investment beats perfect timing
- Process Over Outcome: Focus on systematic investing, not daily returns
- Long-term Over Short-term: Think decades, not quarters
The investors who became “richest” with these funds weren’t necessarily the smartest or most well-informed. They were the ones who:
- Started early
- Invested consistently
- Didn’t panic during crashes
- Stayed invested for 10+ years
The real winner isn’t just the fund with highest returns – it’s the investor who stayed disciplined throughout the journey.
Disclaimer
This article is for educational and informational purposes only and should not be considered investment advice. Mutual fund investments are subject to market risks. Past performance is not indicative of future results.
Please note:
- Returns mentioned are approximate and based on historical data as of August-October 2025
- Actual returns may vary based on entry and exit timing
- 10-year estimates are extrapolated from available data
- Individual results will differ based on investment timing and market conditions
- Tax laws are subject to change
- Always consult with a SEBI-registered investment advisor before making investment decisions
- Read all scheme-related documents carefully before investing
ata
