Mid-cap funds are a type of equity mutual fund that are mandated to invest at least 65 per cent of their assets in mid-cap stocks, i.e., companies which are ranked 101-250 in market capitalisation on Indian exchanges.
Mid-cap funds offer a balanced investment option that falls between large-cap and small-cap funds in terms of risk and potential returns. Here’s how they performed in the one- and five-year tenures as also against their bigger and smaller siblings
Mid-cap funds are a type of equity mutual fund that are mandated to invest at least 65 per cent of their assets in mid-cap stocks, i.e., companies which are ranked 101-250 in market capitalisation on Indian exchanges.
These mid-cap companies have a high growth potential, but are considered less risky than small-cap companies due to their scale and stability.
Benefits And Risks
Unlike large-cap stocks, which are more stable, small-cap stocks can be highly volatile, making mid-cap funds a balanced option for investors seeking higher returns than large-caps, without taking on the higher risk associated with small-cap funds.
However, it’s important to note that mid-cap funds still carry some amount of risk, which is higher than that of large-cap funds.
Both mid-cap and small-cap funds can be risky in the short- to medium-term because the stocks in their portfolios are still in their early growth phase and haven’t reached the stable growth phase seen in bluechip stocks.
Performance Of Mid-Cap Funds
Based on data from the Association of Mutual Funds in India (Amfi), as on August 4, 2023, the category average return for one-year stands at 20.23 per cent.
In terms of one-year return, 19 of the 25 funds have performed above the category average of 20.23 per cent. Mid-cap funds have an average 3-year return of 31.65 per cent, while the 5-year return is 16.48 per cent.
One-Year Return
HDFC Mid-Cap Opportunities Fund has the highest one-year return of 31.13 per cent, followed by Taurus Discovery (Midcap) Fund with 26.74 per cent, and Nippon India Growth Fund with 25.14 per cent.
Three-Year Return
Quant Mid Cap Fund has the highest three-year return of 40.03 per cent, followed by Motilal Oswal Midcap Fund at 38.64 per cent, and Invesco India Mid Cap Fund at 35.32 per cent.
Five-Year Return
Quant Mid Cap Fund has the highest five-year return at 23.28 per cent, followed by Invesco India Mid Cap Fund at 21.36 per cent, and PGIM India Midcap Opportunities Fund at 21.36 per cent.
To compare with other categories, as on August 4, 2023, large-cap funds have given an average return of 14.07 per cent, while small-cap funds have given an average return of 26.31 per cent.
In conclusion, mid-cap funds offer the potential for higher returns with moderate risk compared to small-cap funds.
Thus, investors should carefully consider their risk tolerance and investment goals before choosing mid-cap funds as part of their portfolio.