Mid-cap mutual funds are the type of equity mutual funds that invest in listed mid-cap stocks having a market capitalization of ₹5,000 crores to ₹20,000 crores. According to SEBI, these mutual funds invest in 101st – 250th companies listed on the stock exchange by entire market capitalization.
The term ‘market capitalization’ suggests the company’s total value, which is calculated by multiplying the number of outstanding shares by the current share price. The list of 101st – 250th stocks is the average total market capitalization of the stock on all recognized stock exchanges, such as the NSE and BSE, where it is listed.
Mid-cap mutual funds invest at least 65% of their assets in mid-cap stocks listed on the stock exchange. These funds are less risky than small-cap funds and can generate higher returns than large-cap funds. Therefore, these funds perfectly balance the risk and return of large and small-cap funds.
Short-term capital gains (STCG) arise when you sell your investments within one year of their purchase, which attracts a tax rate of 15%. Long-term capital gains (LTCG) occur when you sell your assets after holding them for over a year, attracting a tax rate of 10%. Dividend earnings attract a tax rate per your income tax slabs, and any dividend earnings above ₹5,000 will also attract TDS.
This article covers:
- Advantages of Mid-Cap Funds
- Disadvantages of Mid-Cap Funds
- Best Mid Cap Mutual Funds 2024
- What is Mid Cap Mutual Fund- Quick Summary
- What is Mid Cap Mutual Fund- Frequently Asked Questions
Advantages of Mid-Cap Funds
The main advantage of mid-cap funds is their diversification, as they invest at least 65% of their assets in mid-cap stocks in various industries, along with large-cap and small-cap stocks.
- Build a good corpus
Mid-cap funds help build a good corpus over time by investing in high-growth stocks. You can choose to invest in these funds and earn significant wealth with the power of compounding.
- Easy to redeem
Mid-cap mutual funds are easy to redeem with the open-ended scheme and by paying a meager exit load. You can buy and sell the units at the prevailing NAV, and they do not generally have a lock-in period, which means they provide enough liquidity for the investors.
- Professionally managed
Mid-cap funds are professionally managed by a fund manager, who tries his level best to reduce the risk and maximize the returns by analyzing the fund’s stock holdings. The fund manager’s experience lies in how well they will be able to analyze the market.
- Start with SIP
You can start investing in mid-cap funds anytime with the SIP (Systematic Investment Plan) at an installment amount as low as ₹500. It does not require you to start investing a large amount at once, and you can begin the SIP while benefiting from rupee cost averaging over the period.
- Good returns
Mid-cap funds have the potential to provide higher returns than large-cap funds, with the stocks having the probability of becoming large-cap. They will become stable over time, and the returns may rise to double digits and be highly volatile.
- Chances of growth
The companies under the mid-cap category have a high chance of growth, with a focus on sectors such as IT, retail, financial, etc. These can grow in the future, offering excellent opportunities to the fund that invests in them.
- Rise in NAV
As the mid-cap stocks do not have enough reports to analyze them, this is a boom for the mutual funds investing in them because people keep investing in them, leading to a rise in the NAV and their value.
Disadvantages of Mid-Cap Funds
The main disadvantage of mid-cap funds is that they are highly volatile in the short run, and during the market lows, the mid-cap stocks will be affected more. It will lead to the loss of the invested capital and reduce the chances of earning returns.
- Can generate lower returns
The return potential of the mid-cap funds is lower than the small-cap funds because they take fewer risks when investing in rising stocks than small-cap funds. So, if you have a higher appetite for risk, small-cap funds can be a better choice.
- Not enough liquid
The mid-cap funds can be redeemed anytime by the investor. Still, the fund manager faces a high level of liquidity risk in selling the mid-cap stocks because of the lower liquidity and finding the investors available to purchase them.
- High cost
They also carry some percentage of the expense ratio to be paid by the investors every time they purchase certain units. If the fund is actively managed, then it has a high expense ratio to be paid.
Best Mid Cap Mutual Funds 2024
Here is the list of the ten best mid-cap funds to invest in as of 14th March 2024:
| S. No. | Fund Name | AUM (Asset Under Management) | NAV (Net Asset Value) | 1-Year Return | 3-Year Return | 5-Year Return |
| 1. | Axis Midcap Fund | ₹18,920 crores | ₹72.87 | 0.15% | 23.2% | 15.54% |
| 2. | Quant Mid Cap Fund | ₹1,551 crores | ₹139.66 | 13.70% | 43.45% | 19.99% |
| 3. | PGIM India Midcap Opportunities Fund | ₹7,708 crores | ₹47.02 | 4.56% | 39.91% | 18.40% |
| 4. | Motilal Oswal Midcap Fund | ₹3,769 crores | ₹55.68 | 18.01% | 30.47% | 16.30% |
| 5. | Kotak Emerging Equity Fund | ₹23,963 crores | ₹84.24 | 10.28% | 31.00% | 15.00% |
| 6. | Nippon India Growth Fund | ₹13,410 crores | ₹2,242.53 | 9.18% | 29.25% | 14.27% |
| 7. | SBI Magnum Midcap Fund | ₹8,733 crores | ₹157.66 | 9.85% | 33.83% | 13.36% |
| 8. | Edelweiss Mid Cap Fund | ₹2,531 crores | ₹57.35 | 7.70% | 32.17% | 13.85% |
| 9. | HDFC Mid-Cap Opportunities Fund | ₹35,010 crores | ₹108.57 | 14.88% | 31.30% | 12.92% |
| 10. | UTI Mid Cap Fund | ₹7,078 crores | ₹195.48 | 3.59% | 28.65% | 11.34% |
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What is Mid Cap Mutual Fund- Quick Summary
- The mid-cap mutual fund is a fund that invests in equity stocks that are mid-cap and are listed on the stock exchange in ranks from 101 to 250.
- The advantages of mid-cap funds are diversification, easy redemption, professionally managed investments, starting with SIPs, good returns, and chances of growth.
- The disadvantages of mid-cap funds are that they can be highly volatile, generate lower returns, do not have enough liquidity, and have a high cost.
- The best mid-cap mutual funds to invest in 2024 are Quant Mid Cap Fund, PGIM India Midcap Opportunities Fund, Motilal Oswal Midcap Fund, etc.
What is Mid Cap Mutual Fund- Frequently Asked Questions
A mid-cap mutual fund is a type of equity fund that invests at least 65% of its holdings in mid-cap stocks that are listed on the recognized stock exchange at the rank of 101 to 250.
The best midcap mutual fund to invest in 2024 is the Quant Mid Cap Fund, which has provided average returns of 19.99% over the last five years.
The best midcap funds for SIP investing can be any fund available for SIP, such as the Quant Mid Cap Fund, PGIM India Midcap Opportunities Fund, Axis Midcap Fund, etc.
Yes, mid-cap mutual funds are a good investment because they can generate better returns than small-cap funds with lower volatility and sometimes higher returns than large-cap funds.
Yes, mid-cap funds are risky, which carry all types of risk that affect any mutual fund, such as liquidity risk, high initial costs, market or volatility risk, and much more.
Yes, mid-cap funds are best for long-term investing for more than a period of five years because they invest in mid-cap stocks that provide stable returns in the long run with the benefit of compounding.
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