Thinking of investing in an equity mutual fund schemes?

It is indeed very crucial to decide the most appropriate fund – i.e. among large-cap, mid-cap, small-cap, sectoral-cap or multi-cap fund category.

Market capitalization is calculated by multiplying the number of outstanding shares a company offers with the current market price of one share.

Each category of market capitalization category has its own advantage and disadvantage.

Mid-cap schemes have the potential to make investors rich over a long period.

In this article, I will take you through the mutual funds that invest only in mid-cap stocks.

What are mid-cap funds?

SEBI (Securities and Exchange Board of India) has defined three categories, based on market capitalization.

  • Large Cap: Top 100 companies in terms of market capitalization
  • Mid Cap: 101st- 250th companies in terms of market capitalization
  • Small Cap: 251st company onwards in terms of market capitalization

In mid-cap funds, a large portion of the investment is done in companies with medium market capitalization.

Mid-sized companies fall somewhere between small and large-sized companies and are very popular among investors, because they are considered compact.

In mid-cap funds, minimum investment in equity & equity related instruments of mid-cap companies have to be 65% of total assets.

When one invests in mid-cap funds for the long-term, he may be investing in companies that could become tomorrow’s runaway success stories.

What are the benefits of investing in mid-cap funds?

Some  key benefits of investing in mid-cap funds are as follows:

1.Mid cap funds have outperformed large-cap funds, and the trend is not likely to change anytime soon.

Mid-cap funds are less risky and volatile as compared to small-cap funds, yet provide better high growth opportunities as compared to a large-cap fund.

2.Mid-cap funds are more liquid, as compared to small-cap funds.

Mid-cap companies have been in the business long enough to avoid blunders usually made by small-cap companies.

Why should you invest in mid-cap funds?

Mid cap stocks have shown exponential growth in recent past and you can a decent corpus by investing in these funds, but how much you invest in mid cap fund depends on your risk appetite.

If we consider the life cycle of a business, mid-caps refer companies which have achieved middle level growth and are growing exponentially.

To sum it up, mid-cap funds can be a great investment instrument, for investors looking for funds with high returns, without the volatility of small caps, or index-related returns of large-caps.

Also, it is advisable to invest through the SIP route, as you will be able to derive the benefit of rupee cost averaging.

5 Best mid-cap funds for 2018

Here is the list of top 5 mid-cap fund for 2018:

midcap
Fund Name1Y3Y5YCategoryRisk
Axis Midcap Fund - Direct - Growth5.06%12.79%22.28%Equity
(Mid Cap)
Moderately High

1. Axis Midcap Fund – Direct – Growth

This is currently considered one of the best funds in the mid cap segment:

Key information

Launch Date1 January 2013
NAV (14 Sep 2018)₹39.4
Plan TypeDirect
Rating by Groww5 Star
AUM (Fund Size)₹1,396 Cr
RiskometerModerately High
Minimum SIP₹1,000
Minimum SWP₹500
Performance w.r.t its BenchmarkHas consistently outperformed its benchmark S&P BSE Mid Cap TRI since its launch.
Age of the fund5 years old
Expense Ratio1.38%
Exit LoadIf redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Type Open Ended

Returns per annum

midcap
Fund Name1Y3Y5YCategoryRisk
Axis Midcap Fund - Direct - Growth5.06%12.79%22.28%Equity
(Mid Cap)
Moderately High

Holding Analysis

1.The top 5 portfolio holdings of the fund include GRUH Finance Ltd., Bajaj Finance Ltd., Page Industries Ltd., City Union Bank Ltd. and Supreme Industries Ltd.

2.The holdings are balanced across various sectors with maximum weightage given to financial services (32%) followed by consumer goods (18%).

2. Invesco India Mid Cap Fund – Direct – Growth

Another top rated fund in the mid-cap category, this fund has given the highest returns in the last 5 years.

Key information

Launch Date1 January 2013
NAV (14 Sep 2018)₹54.5
Plan TypeDirect
Rating by Groww5 Star
AUM (Fund Size)₹179 Cr
RiskometerModerately High
Minimum SIP₹1,000
Minimum SWP₹1,000
Performance w.r.t its BenchmarkHas consistently outperformed its benchmark NIFTY Midcap 100 TRI since its launch.
Age of the fund5 years old
Expense Ratio1.03%
Exit LoadIf redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Type Open Ended

Returns per annum

DurationReturns
1 year12.2%
3 years16.4%
5 years29.5%
Since launch21.81%

Holding Analysis

1.The top 5 portfolio holdings of the fund include United Breweries Ltd., RBL Bank Ltd., MRF Ltd., Sanofi India Ltd, and Schaeffler India Ltd.

2.The holdings are balanced across various sectors with maximum weightage given to financial services (17.6%) followed by consumer goods (13.9%).

3. L&T Midcap Fund – Direct – Growth

This is one of the most popular funds in the mid-cap segments and the fund has reached a sizeable AUM as well.

Key information

Launch Date1 January 2013
NAV (14 Sep 2018)₹147.1
Plan TypeDirect
Rating by Groww4 Star
AUM (Fund Size)₹2,808 Cr
RiskometerHigh
Minimum SIP₹500
Minimum SWP₹1,000
Performance w.r.t its BenchmarkLast 1Y is less than its benchmark NIFTY Midcap 100 TRI.
Age of the fund5 years old
Expense Ratio1.53%
Exit LoadIf redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Type Open Ended

Returns per annum

DurationReturns
1 year2.9%
3 years18.6%
5 years31.4%
Since launch24.1%

Holding Analysis

1.The top 5 portfolio holdings of the fund include Bharat Financial Inclusion Ltd., Emami Ltd., Berger Paints Ltd., The Ramco Cements Ltd.and City Union Bank Ltd.

2. The holdings are balanced across various sectors with maximum weightage given to financial services (20.7%) followed by industrial manufacturing (12.9%).

4. Kotak Emerging Equity Scheme – Direct – Growth

This is a well balanced fund and has given decent returns over the long term.

Key information

Launch Date1 January 2013
NAV (14 Sep 2018)₹41.7
Plan TypeDirect
Rating by Groww4 Star
AUM (Fund Size)₹3,163 Cr
RiskometerModerately High
Minimum SIP₹1,000
Minimum SWP₹1,000
Performance w.r.t its BenchmarkLast 1Y is less than its benchmark NIFTY Midcap 100 TRI.
Age of the fund5 years old
Expense Ratio1.34%
Exit LoadIf redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Type Open Ended

Returns per annum

DurationReturns
1 year4.6%
3 years16.6%
5 years31.5%
Since launch21.3%

Holding Analysis

1.The top 5 portfolio holdings of the fund includes Bharat Financial Inclusion Ltd., Schaeffler India Ltd., RBL Bank Ltd., Atul Ltd. and The Ramco Cements Ltd.

2.The holdings are balanced across various sectors with maximum weightage given to financial services (24.5%) followed by industrial manufacturing (18.6%).

5. Sundaram Mid Cap Fund – Direct – Growth

This is a decent fund and what’s more, you can invest in this fund with a minimum SIP of just ₹250!

Key information

Launch Date1 January 2013
NAV (14 Sep 2018)₹507
Plan TypeDirect
Rating by Groww4 Star
AUM (Fund Size)₹6,039 Cr
RiskometerHigh
Minimum SIP₹250
Minimum SWP₹1,000
Performance w.r.t its BenchmarkHas consistently outperformed its benchmark S&P BSE Mid Cap TRI since its launch.
Age of the fund5 years old
Expense Ratio1.40%
Exit LoadIf redeemed bet. 0 Year to 1 Year; Exit Load is 1%;
Type Open Ended

Returns per annum

DurationReturns
1 year6.7%
3 years14.4%
5 years30%
Since launch20.7%

Holding Analysis

1.The top 5 portfolio holdings of the fund include The Ramco Cements Ltd., Sundaram Clayton Ltd., Quess Corp Ltd., Mahindra CIE Automotive Ltd. and Schaeffler India Ltd.

2.The holdings are balanced across various sectors with maximum weightage given to financial Services (17.4%) followed by industrial manufacturing (16.5%).

Conclusion

A mid-cap fund lies between a large-cap and a small-cap fund.

Mid-cap funds tend to be riskier than large cap funds, but at the same time they offer higher returns and growth opportunities.

These companies have a higher capacity to produce returns since they are more focused and dynamic as compared to larger, well established companies.

But the returns are still less than that of small-cap funds, along with lower risk.

However, these funds are highly volatile and could lead to a loss if held for short-term. Therefore, these funds are suitable for investors with higher risk appetite looking for higher returns in the long run.

Also, I will not recommend mid-cap schemes to new investors, they might get spooked if the market goes through a volatile phase

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww