Experts believe if investors are keen to invest in mid-cap funds they should choose those that have exposure to a fair sprinkling of large-cap stocks.
As stock market has picked up momentum in recent days, there has been big action in the mid-cap universe, with the BSE Mid-cap Index touching its all-time high on 12,203 on July 15, 2016. The wave has also carried mid-cap mutual funds to new highs.
If you are a mutual fund investor wanting to invest in mid-cap funds, the question that you would be asking is whether these funds are good bets at this point or should one avoid? Do these funds have steam left in them or a fall in mid-cap stocks on the market lead to capital loss?
Experts believe that one should tread with caution at this point. “Midcaps have run up too much and too fast in the past 3-4 months. Post the February correction in markets, this marketcap segment saw a rally. As a result, the price earnings ratio (of Nifty Midcap) has run up from a trailing 26 times just 6 months ago to a trailing 34 times now. For new investors, just going for their first equity fund or those investing through lump sum mode, mid-cap funds can be risky bets at this point. Small and micro-cap funds remain more riskier,” Vidya Bala, Head, Mutual Fund Research, FundsIndia.com, told FeMoney.
Bala believes if investors are keen to invest in mid-cap funds they should choose those that have exposure to a fair sprinkling of large-cap stocks. “Investors need to look for less volatile funds in this space, if they do not want their portfolios to undergo too much ups and downs. They should ideally go for midcaps with some exposure to large-caps as well. If they cannot weather volatility, they should simply go for multicaps since this segment will offer a good dose of midcap stocks.”
She prefers midcaps with slightly higher average marketcap exposure such as Franklin India Prima and HDFC Mid-Cap Opportunities.
Renu Pothen, Research Head, fundsupermart.com picks Mirae Asset Emerging Bluechip Fund, Canara Robeco Emerging Equitiues and SBI Magnum Midcap Fund as good bets in the mid-cap fund space.
“We suggest a small proportion of mid-cap funds to our balanced investors while a higher proportion will be allocated in the portfolios of our moderately aggressive and aggressive investors,” says Pothen.
Fundsupermart believes mid-cap space may have some steam left in it and feels that whenever economy is on a growth path, the mid and small-cap segment will be the biggest beneficiaries.