Moneycontrol PRO
UPCOMING EVENT:Attend Traders Carnival Live, 3 days 12 sessions. Early bird offer ending soon Rs.999/-, exclusive for Moneycontrol Pro subscribers. Register now!

Does a five percent correction in small and midcaps worry you? Here are MC30 mid and small-cap fund picks

These schemes must be a part of your portfolio so that you get a kicker in returns over the long run

August 23, 2021 / 09:20 AM IST

Last week, Moneycontrol introduced a 30-fund basket called the MC30. It narrows your choices from a staggering 1,600 schemes to a crisp basket of 30. Six of the mutual funds are from mid and small-cap categories.

Apart from investing in prominent names, you must also set aside some money for deploying in tomorrow’s leaders. These are mostly as mid and small-cap companies.

Also see: The complete MC30 basket of mutual fund schemes

Mid and small-sized firms give superior returns

A well-managed fund could give superior returns in the long run. Nifty 50 index gave 10.6 percent returns over five-year time periods taken in the past 15 years. But Nifty Midcap 100 index gave 14.2 percent and Nifty Smallcap 250 index gave 11 percent returns during the same period.


Also read: How should investors use MC30?

Measure your steps in the small-cap space

That doesn’t mean, you should just invest all your money in small and mid-cap funds. These funds can be volatile in the short run. Pick and choose funds in smaller proportions to begin with. And then, you can increase your exposure slowly.

And watch the rapid rise in the corpus sizes of small-cap funds. Many of the top-performing small-cap funds have already grown to large sizes. So long as your fund manager can manage the liquidity, it’s fine. But gigantic small-cap funds are not desirable. It gets difficult for your fund to exit or enter stocks in a meaningful way, especially during volatile markets.

Here are our mid and small-cap picks

Axis Midcap Fund

Axis Mutual has many top-performing schemes and Axis Midcap Fund (AMF) is one of them.

In 2018 and 2019, when mid-cap stocks didn’t do that well, AMF was better at protecting downsides than most of its peers. It’s Sortino Ratio (a key risk-adjusted return metric) was the highest in its category. Shreyash Devalkar has been managing AMF since 2016.

Devalkar likes companies that have free cash flows, low debt-levels, and good corporate governance.

Also read: Presenting MC30’s largest equity fund schemes

Kotak Emerging Equity Fund

Kotak Emerging Equity Fund (KEEF) is one of the largest schemes in this category, managing Rs 15,193 crore. But a large size hasn’t affected its allocation to mid and small-cap stocks. It has invests at least 90 percent of its equity portion in such firms, as against the overall category average of 84 percent.

KEEF held 58-70 stocks in its portfolio over the last five years. Unlike most of the funds in the mid-cap category, it has not taken active cash calls and has been nearly fully invested (average cash holding was 3.7 percent for the last five years).

Pankaj Tibrewal has been managing the fund since 2010. He likes companies with low levels of debt, apart from firms that are leaders within the sectors they operate.

DSP Midcap Fund

Steady performances across time frames and the ability to protect downsides make DSP Midcap Fund (DMF) a good pick. DMF is also among the least volatile mid-cap funds, as measured by standard deviation, a key risk metric in MC30. Vinit Sambre and Resham Jain manage this fund.

The scheme doesn’t churn much – a good attribute. And the portfolio is relatively tighter than that of its peers.

Also read: Just two tax-savings equity funds in MC30

Invesco India Midcap Fund

A small corpus of Rs 1,861 crore puts Invesco India Midcap Fund (IMF) in a sweet spot in taking advantage of mid and small-cap market rallies. Pranav Gokhale and Neelesh Dhamnaskar have been jointly managing this fund since 2018.

The fund likes companies whose managements come with proven track records. This is a low-risk mid-cap fund.

Also read | What are passively-managed funds doing in MC30?

Axis Small-cap Fund

Axis Small-cap Fund (ASF) does well in rising and falling markets. In 2018 and 2019, when small-cap stocks saw a sharp correction, ASF contained the fall better than most others.

Like AMF, ASF too takes active cash calls. At times the scheme holds up to 26 percent of its corpus in cash so that scheme is cushioned in case of heavy market falls, when mid-cap indices fall like nine pins.

Also read: MC30: The methodology behind the curated basket of mutual fund schemes

SBI Small-cap Fund

Prudent stock selection and efficient cash calls have helped SBI Small-cap Fund (SSF) deliver robust returns in rising markets and fall less than its peers during declines. R Srinivasan has been managing this fund since 2009.

Also see: The complete MC30 basket of mutual fund schemes

With over 50 stocks, the scheme is well-diversified, despite being a small-cap fund. And it doesn’t invest more than six percent of the corpus in any stock.
Dhuraivel Gunasekaran
first published: Aug 23, 2021 08:40 am

stay updated

Get Daily News on your Browser
ISO 27001 - BSI Assurance Mark