Mid-cap stocks have seen a massive run-up in the current financial year with the Mid-cap index rising over 22 per cent since April 1, 2016 till August 24, outperforming the Sensex which rose 11 per cent during the period. The rise has resulted in many mid-cap mutual fund showing stellar performance and giving good returns to investors.
The Mid-cap Index closed at 13,023.88 on August 24 against 10,643.32 on April 1. Against this, the Sensex rose from 25,269.64 on April 1 to 28,059 on August 24.
But is this a good time to invest in mid-cap funds? What should your fund strategy be after the major rise?
“The mid-cap index has rallied a lot and the valuations appear to be frothy. Overall investing depends on the specific fund but overexposure to any segment or sector is never a good idea,” says Ishaan Gupta, Founder & CEO, Wixifi, a mutual funds and stock investment advisory.
Gupta felt that a mix of funds would be the best option at present. “We tend to measure the risk of the fund in terms of the volatility it exhibits. Our algorithm currently suggests a mix of mid-cap, small-cap, sector funds and large-cap where the sharpe ratios are high and where the expected alpha over and above the benchmark is expected to be high,” he said.
If one has to stick to the mid-cap and small-cap funds segment, Gupta recommends investment in direct plans and his top picks are Franklin India Smaller Companies Fund, SBI Magnum Midcap Fund and UTI Midcap fund.
Recently, FundsIndia.com said that in case an investor has been invested in the mid-cap funds and is sitting on good gains, her or she could consider switching to a portion of the money to large-cap funds. “The best you can do to re-balance is to make your future investments, or add more investments now, in large-cap and diversified funds, as this is also a good time to enter the large-cap category given the relatively reasonable valuations. This will also help bring down overall your exposure to mid- and small-caps, and thus reduce the volatility in your portfolio,” Vidya Bala, Head of Mutual Fund Research, FundsIndia.com advised.