Midcap Funds – Invest beyond Top 100 Stocks

 

As per the SEBI Mandate Mid-cap Funds invest 65% of their funds in the Midcap Companies. These Companies are the ones having 101-250th  rank in terms of full market capitalisation.

 

Why Mid-cap funds ?

 

Midcap companies have the potential to generate higher returns than the large cap companies over the long term, they have been wealth creators for the long term investors, though the ride to the top is often very bumpy. The value unlocking in the midcap segment may take longer duration and may test one’s patience at times.

 

Currently the valuations of mid-caps seem reasonable as they have been battered badly after making peaks in the early 2018. The PE ratio of the Nifty Midcap 100  has corrected badly from the levels of 54 in Jan,2018 to 26.26 currently.

 

The Allocation to the Midcap funds depends on one’s risk profile. We suggest to restrict the exposure to mid and small cap segment funds to 25% of one’s portfolio.

 

 

Some brief note some of the funds :

 

Axis Midcap Fund :  The fund was launched in Feb 2011 and has generated return of 17.42% annually since inception. The Fund scores high on the volatility standards. The funds maintains a concentrated portfolio and has a good exposure (22%) to large caps. The fund has invested in high growth companies which have earnings visibility. The Fund is managed by Shreyash Devalkar since Nov 2016 and has been one of the best performers in the worst times for the midcap segment.

 

Kotak Emerging Equity Scheme :  The fund is managed by Pankaj Tibrewal since 2010 and has generated 12.11%  returns since inception (2007) for it’s investors. The fund manager invests in companies with strong brand name, business and market share. He focuses for investing in growth stocks that have sustainable competitive advantages. The Fund manager also claims to be able to liquidate 80% of his portfolio in less than a month. These factors give the fund a lot of stability and dependability.

 

DSP Midcap Fund :  The fund is a star performer and has generated a return of  14.60% p.a for its investors since inception(Nov-06). The fund is managed by Vinit Sambre since July 2012 and has been doing well. The Fund house has parted ways with Blackrock in 2018  and significant team has changed since then. But regardless of the changes we are cautiously optimistic that the fund will outperform in the times to come.

 

L&T Midcap Fund :  The fund has been an out-performer and has generated a return of  18.57% p.a for its investors since inception(Aug-04). Mr S N Lahiri the CIO left the AMC in Nov,18. Mr Vihang Naik is managing the fund since jun 2016 and has done fairly well. One can invest in the fund with a long term horizon as the fund as it has delivered in all business cycles.

 

Success of Mutual Funds especially of the mid and small cap segments depends on the fund manager’s ability and his unique style. Pick any of the above that matches your profile and thinking or go with two – three with distinct styles to ride your wealth journey.

 

Do leave your comments and feedback.