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As small cap and midcap funds continue their outperformance amid the pandemic, an ICICI Securities report has said that the category average return of small cap funds have been around 100 per cent in the past one year.

"Small cap funds and midcap funds continue to outperform since last one year with category average return of small cap funds at around 100 per cent in the last one year," it said.

Further, the credit risk funds and medium-term funds are outperforming as a stable yield environment led to higher return in these higher YTM funds. Also, global funds have seen underperformance in the last one year as Indian markets have seen outperformance, noted the report.

Within large cap-oriented ETFs, Nifty Next 50 and Sensex Next 50 have seen outperformance over Nifty 50 ETFs since the last six months. Smart beta ETFs like NV 20/Low Vol 30, Quality 30, among others have underperformed. In thematic ETFs, PSU Bank ETF has delivered the highest return in the last six months at 35 per cent.

On the market outlook, the ICICI Securities report said that the midcap and small cap funds are better placed. Earnings growth during a recovery phase is likely higher in midcaps and small caps in comparison to large caps whereas multiple expansion could further aid additional returns.

"With respect to Nifty earnings, we expect it to grow at 24 per cent CAGR in FY21E-23E. This earnings momentum is likely to provide support at lower levels," it said.

The mutual fund industry AUM rose by 2.1 per cent in May 2021 to Rs 33.06 lakh crore from Rs 32.4 lakh crore in April 2021, primarily due to mark to market gain in equity funds.

AUM of open-ended equity funds is now at Rs 10.7 lakh crore against Rs 9.9 lakh crore in April 2021.

Equity funds witnessed inflows of Rs 10,000 crore in May, a third consecutive month of inflows. Equity funds had seen outflow for the eight consecutive month till February.

Further, SIP flows are now back to pre-Covid levels with May inflow at Rs 8,800 crore.