Moneycontrol review: Helios MF launches mid-cap fund - should you invest?

NFO for Helios Mid Cap Fund opened on February 20 and will close on March 6, 2025.

Samir Arora-backed Helios Mutual Fund, which is among the latest entrants into the Indian asset management industry, has launched a mid-cap fund.

At a time when the Nifty Midcap 150 Total Return Index (TRI) has dropped around 12 percent over the six months leading up to February 20, does it make sense to invest in the scheme?

The new fund offer (NFO) for Helios Mid Cap Fund opened on February 20 and will close on March 6, 2025.

What’s on offer?

Helios Mid Cap Fund would predominantly invest in Indian mid-cap companies, which are ranked from the 101st spot to the 250th spot in terms of market capitalisation.

Also read | How increasing your home loan EMI by Rs 5,000 can save over Rs 26 lakh in interest

Like the rest of its equity funds, Helios’ new fund will follow the elimination investing strategy.

Under the elimination-based screening, the scheme will avoid stocks based on eight parameters. These parameters are bad themes (size of opportunity); unfavourable industry dynamics; potential for disruption; chinks/weakness in management/ background/ strategy; poor corporate governance; low -quality accounting; negative medium-term triggers (in most cases projected financial performance) and unreasonably high valuations.

Dinshaw Irani, Chief Executive Officer, Helios Mutual Fund, said, “Of the 150 stocks in the midcap universe, 30-odd stocks still have a lot of froth left. Of the 120 stocks remaining, 30 to 40 stocks have a lot of value. We will have around 30-35 stocks in the portfolio and also a fair sprinkling of small-cap stocks because we want to make this fund more of a mid-cap and small-cap strategy with high alpha and high beta opportunities for investors.”

According to Irani, the fund house had received the capital markets regulator’s approval for the scheme around six months back but waited for the valuations to become favourable to launch the fund.

“This is the time when one can really work on identifying stocks, which will be multibaggers going into the future. Maybe there'll be consolidation in the markets for the next couple of quarters. But we believe that the bottom has more or less been achieved by the markets and fundamentals are improving,” added Irani.

The benchmark of the scheme is the Nifty Midcap 150 Total Return Index (TRI) and the managers are Alok Bahl (chief investment officer, Helios MF) and Pratik Singh.

What works?

Mid-cap stocks may have corrected sharply in the short term, but data from ACE MF shows that the Nifty Midcap 150 TRI has outperformed small-cap stocks over the long term.

According to Karan Aggarwal, CIO of Elever, mid-cap and small-cap segments shouldn’t be written off.

Also read | What's the smarter choice — to buy a flat or rent one?

“While concerns about underperformance exist, historical data suggests mid-caps have consistently delivered higher returns over long periods. For instance, a 10-year SIP in the Nifty Midcap150 Index Fund has yielded 17 percent annualised returns versus 14.25 percent for the Nifty50 Index Fund,” Aggarwal said in a note recently.

What doesn’t work?

Mid-cap stocks are volatile in nature and may work for investors with a high risk appetite. They can be unnerving in the short run, especially in turbulent times.

Further, despite corrections, valuations of mid-cap stocks are still on the higher side. The Nifty Midcap 150 Index quoted at a price-to-earnings multiple of 35.1 whereas the Nifty 50 Index quoted at 20.40 as on February 20, 2025.

Given the restrictive mandate of mid-cap funds, an investor would be better off with a flexi-cap or a multi-cap fund if he or she is keen on mid-cap exposure.

What should investors do?

As a mutual fund, Helios has a short track period of less than one and a half years. However, Helios group as a portfolio management service (PMS) has a long history of around 20 years with a proven track record.

Also read | Equity mutual funds keeping powder dry as market correction plays out

Deepak Chhabria, CEO of Axiom Financial Services, said, “It is a good time to build a portfolio as an investor. For asset managers as well it makes sense to launch a fund during market corrections as it provides them with an opportunity to do better stock picking and impact costs are also lower. Helios have a good investment strategy and are good stock pickers.”

Investing in these funds is advisable only if one fully understands the associated risks and has the patience to remain invested for at least seven years or longer.