Mid cap mutual fund schemes, as the names suggest, invest in stocks of mid-sized companies or stocks with medium market capitalizations. In this context, the word ‘cap’ refers to the market capitalization or size of the listed company. For mid cap the market capitalization ranges between Rs. 500 crore to Rs. 10000 crore. A company’s size is an important criterion while selecting equity portfolios because depending on the size of the company the portfolio would have its unique set of opportunities and risks.
Since these funds are invested in mid cap companies, during a bull run they deliver stupendous returns, sometimes even outperforming large cap funds or equity diversified funds. This happens because during a bull market, the underlying stocks in the funds are able to unlock their values and tap into the growth opportunities.
Investors who are looking for faster growth and high risk appetite for risks compared to those of large cap funds should invest in mid cap funds. Mid-sized companies happen to provide faster earnings and steep growth while being volatile on the stock index. Investors who are ready to live with the volatility of these stocks in expectations of fascinating returns should definitely go ahead with midcap funds.
If we consider a long term history of mutual funds, midcap funds have consistently outperformed large cap funds. In fact the very nature of funds is that this trend is not likely to change any soon.
The Midcap funds are relatively underfollowed in stock markets as compared with large cap funds. This provides the investors with a huge opportunity to seek fast growth in their investments using these funds.
Though Midcap funds perform very well in bull runs, they tend to plunge in value when the market sentiment is dipping. Also, in case of high quality stocks, mid cap funds are not appropriate since they have a higher risk factor involved. Mid-cap stocks suffer from liquidity constraints due to their smaller capital base i.e. number of shares offered by the company.
Since the underlying shares are characterized by lower market capitalizations and limited liquidity, these funds tend to follow cycle of boom and dip. This is based on mirroring of the stock indices in general.
The performance of Midcap funds are mentioned below for the year 2017.
Rise of Small and Midcap funds
|Large Cap funds||32.50%|
|Small cap funds||57.90%|
Based on CRISIL ranking and fund performance indicator values which were discussed above, top equity funds are listed below. Here, the ranking is done for a consolidated list of mid cap equity funds (including all above categories) on a 1 year return basis. Please note that the table represents only direct funds. However, as per SEBI mandate, each of these funds has its regular fund type with higher expense ratio.
|Midcap Mutual Fund||Rating||Category||Expense Ratio (%)||1-Year Return (%)||1-Year Rank||Net Assets (Cr)|
|Aditya Birla Sun Life Pure Value Fund – Direct Plan||* * * * *||EQ-MC||1.05||27.97||1||3263.16|
|Mirae Asset Emerging Bluechip Fund – Direct Plan||* * * * *||EQ-MC||1.64||20.68||2||5131.36|
|L&T Midcap Fund – Direct Plan||* * * * *||EQ-MC||1.55||26.74||3||2312.67|
|Edelweiss Mid and Small Cap Fund – Direct Plan||* * * *||EQ-MC||1.04||30.7||4||652.7|
|Canara Robeco Emerging Equities Fund – Direct Plan||* * * * *||EQ-MC||0.9||25.19||5||3235.23|
|Escorts High Yield Equity Fund – Direct Plan||* * * *||EQ-MC||–||11.7||6||7.33|
|Principal Emerging Bluechip Fund – Direct Plan||* * * * *||EQ-MC||0.63||24.69||7||1666.11|
|L&T India Value Fund – Direct Plan||* * * * *||EQ-MC||1.4||20.06||8||7405.6|
|Sundaram Select Midcap Fund – Direct Plan||* * * *||EQ-MC||1.58||18.75||9||6256.31|
|BNP Paribas Midcap Fund – Direct Plan||* * * *||EQ-MC||0.91||19.65||10||813.78|
(Based on CRISIL and Value-Research reports across multiple indicators)*
|Midcap Mutual Fund||3-Year Return(%)||5-Year Return(%)|
|L&T Midcap Fund-Reg(G)||18.26%||29.03%|
|Aditya Birla SL Pure Value Fund(G)||17.62%||28.20%|
|DSPBR Midcap Fund-Reg(G)||16.77%||25.68%|
|Kotak Emerging Equity Scheme(G)||15.34%||26.16%|
|HDFC Mid-Cap Opportunities Fund(G)||14.84%||26.00%|
|UTI Mid Cap Fund-Reg(G)||11.17%||26.10%|
*This is a representative list based on key metrics. It does not serve as a recommendation of funds nor does it claim to the only correct way to rank funds.