Mid-caps beat small-caps in the long term. Here are top performing mid-cap funds
Mid-cap companies are fairly established firms with an improving business model. Mid-cap mutual fund schemes can offer balanced growth while carrying a modest level of risk compared to large-cap and small-cap funds
Mid-cap mutual fund schemes that primarily invest in midsized companies have the potential to outperform their small-cap and large-cap counterparts in the long run. Moneycontrol’s analysis of the 10-year rolling returns of Nifty Mid-cap 150 Total Return (TRI) and Nifty Smallcap 250 TRI shows that the mid-cap index beat the small-cap index comfortably over the long term. Both mid- and small-cap companies often have a higher growth potential than the established large-cap firms as they are in their growth phase. Meanwhile, small-cap stocks are more economically sensitive than mid and large-cap stocks and vulnerable to losses.
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There are now 28 actively managed small-cap funds and 29 actively managed mid-cap funds available. In contrast to the index comparison result, an analysis based on the 10-year rolling returns of the mid-cap and small-cap mutual fund categories reveals that, for most of the time periods, the small-cap fund category outperformed the mid-cap fund category. Two schemes from the small-cap category --Nippon India Small Cap Fund and SBI Small Cap Fund-- have done exceptionally well within the category and managed to outperform their peers with a significant margin. Removing those two schemes from the category average of small-cap funds has resulted in the category narrowing down the outperformance against the mid-cap category, significantly. It reveals that mid-cap schemes can generate similar returns to that of small-cap funds while taking relatively lower risk.
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Choosing the right stocks in the small-cap space is crucial for small-cap fund managers while constructing the portfolio. There has been a high probability of calls going wrong in the small-cap space which, in turn, could impact the overall portfolio. Meanwhile, mid-cap companies are almost established firms with an improving business model. Mid-cap schemes can offer balanced growth, while carrying a modest level of risk compared to small-cap funds. Mid- and small-cap schemes are meant for long-term investing. Investors can choose these schemes based on their asset allocation strategy, risk profile and goals. Investors can consider MC30, a curated list of investment worthy schemes which has three mid-cap schemes in its basket. Here are the top mid-cap funds based on the 10-year rolling returns that were calculated from the last 15 years period. Only schemes having at least 15 years of NAV history are considered. Portfolio data as of June 2024. Source: ACEMF.
