Mid cap funds – An analysis

Scheme characteristics : As per the categorisation and rationalisation of mutual fund schemes prescribed by SEBI, mid cap scheme is one where “minimum investment in equity & equity related instruments of mid cap companies-65% of total assets”. In general, an open ended scheme which predominantly invests in mid cap stocks. Mid cap universe is also defined clearly, which is 101st – 250th company in terms of full market capitalisation. At present there are 25 mid cap schemes, open ended, available for purchase. I have excluded a few schemes which are less than 50Cr in size, intentionally.

As I did in the previous analysis, the objective is to identify funds and classify them under four categories namely a) Likely out performers b) Likely challengers c) Likely outliers & d) Watchlist.

Sl NoLikely out performersLikely challengersLikely outliersWatchlist
1Axis mid cap fundBNP Paribas mid cap fundMotilal Oswal mid cap 30 fundL&T mid cap fund
2DSP mid cap fundInvesco India mid cap fundSundaram mid cap fundHDFC mid cap opportunities fund
3PGIM mid cap opportunities fundTata mid cap growth fundICICI Prudential mid cap fund
4UTI mid cap fund

Axis mid cap fund : is a 5098 Crore sized fund, with 62 holdings and 36.5% exposure to top 10 stocks. Cash held as on Apr 30, 2020 is very close to 14%. YTD, this has fallen the least in the category. This fund delivered 11.33% in the year 2019 and remained on top. In the year 2018 this was the only fund to deliver positive returns in the entire category. Excellent downside protection is seen over 1 and 3 year periods. PE and PBV are costly but long term expected earning is reasonable. Portfolio seems well positioned for out performance. Right choice for defensive mid cap investors.

PGIM India mid cap opportunities fund : is a 145 Crore sized fund, with 52 holdings and 40.61% exposure to top 10 stocks. Cash held as on Apr 30, 2020 is just 3.79%. YTD, this has fallen less in the category. This fund delivered 3.57% in the year 2019 and remained one among the few to deliver positive returns. Reasonable downside protection is seen over 1 and 3 year periods, but expected to be volatile. PE and PBV are reasonable and long term expected earning is looking very attractive. Portfolio seems well positioned for out performance. The right choice for aggressive mid cap investors, especially considering the fact that this carries the best upside capture in the last one year among its peers. The size of the scheme being small has the potential to deliver big.

DSP mid cap fund : is a 6487 Crore sized fund, with 49 holdings and 34.87% exposure to top 10 stocks. Cash held as on Apr 30, 2020 is very close to 9%. This fund delivered 9.21% in the year 2019, which was a good recovery from an average performance in the year 2018. Very good downside protection is seen over 1 and 3 year periods. PE and PBV are reasonably valued and long term expected earning is reasonable too. Likely to keep up its performance. Does the growing size a challenge ? Over time, we would know this better

Invesco India mid cap fund : is a 747 Crore sized fund, with 46 holdings and 33.58% exposure to top 10 stocks. Cash held as on Apr 30, 2020 is very close to 4%. YTD, this has fallen in line with the category. This fund delivered 3.8% in the year 2019 and remained consistent taking in to account its 2018 performance of (-5.27%). With an excellent downside protection (one among the top 4) over 1 and 3 year periods, this fund just ensures to capture the upside too. PE, PBV and Long term expected earnings are reasonable. Portfolio seems well positioned for consistent performance. Ideally suited for those seeking long term consistent returns in the mid cap category.

Tata mid cap fund : is a 723 Crore sized fund, with 47 holdings and 37.3% exposure to top 10 stocks. Cash held as on Apr 30, 2020 is very close to 6%. YTD, this has fallen in line with the category. This fund delivered 6.5% in the year 2019. Good upside capture with reasonable downside protection is seen over 1 and 3 year periods. PE and PBV are relatively costly but long term expected earning is excellent.

Motilal Oswal mid cap 30 and Sundaram mid cap could take the limelight, the former with concentrated bets and the other with a longish portfolio. Watch list is a category of mid cap schemes with interesting portfolios that have done well in the past and cannot be completely ignored. Keeping track of the performance of these schemes is essential to arriving at a decision to buy, hold or exit.

Disclaimer : This is not a recommendation to buy or sell a fund and this should be read as an analysis. Investors are advised to consult their financial advisors to check the suitability of these schemes for investing based on their investment agenda. Performance data as on 15th of May 2020.

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