There is an ups and downs environment in the stock market. The market falls for four days and then rises for one day. Amid this market decline, growth funds are becoming popular again. Data from the Association of Mutual Funds of India (AMFI) shows that in September in the midcap category, Rs. 6,940 crore was invested, which is about 37 percent higher than in September last year. The major reason for investor interest in midcap funds is the recent decline in midcap stocks, which has made the category very attractive at current levels.
Midcap funds are one of the oldest types of mutual funds in India and focus on investing in companies that have shown better than average growth in the past. The key feature of this category of mutual funds is that they emphasize capital growth rather than regular dividend payments. The midcap category has given tremendous returns to investors.
Rs. 10,000 Rs. 4.3 crore converted into Rs
Take the example of Nippon India Growth Mid Cap Fund, which was one of Nippon India’s initial mutual funds in 1995. If an investor invests Rs. 10,000 as a lump sum investment, today its value would be Rs. 4.3 crore would have been. The fund has given a CAGR of around 22%. This fund has never exceeded its Rs. 10 did not fall below the face value.
Excellent returns from these mid-cap funds in 7 years
19 percent return in 10 years
Mid-cap funds from fund houses like Edelweiss and Invesco Mutual Fund have returned between 17% and 19% over the last ten years. The mid-cap category is considered attractive as it has an excellent balance between growth and stability. Mid-cap companies (ranked 101 to 250 by market capitalization) have eliminated the existential risks of early-stage small-cap companies, and also offer the potential for higher revenue growth rates than mature, large-cap blue-chip companies. Additionally, mid-cap companies often operate in fast-growing sectors—such as specialty manufacturing, consumer discretionary, healthcare, and technology—where they are rapidly gaining market share from unorganized players or legacy market leaders.
Strong returns over the long term
If you look at returns, growth-oriented mid-cap funds are considered good long-term wealth creation funds over a period of 5 to 10 years. Mid-cap companies often outperform large-cap benchmarks due to their faster earnings growth. Look at the 5-year returns. Top 3 funds in this category have returned more than 20%. Nippon India Growth Midcap Fund is the leader with 22.62%, followed by Edelweiss and HDFC Midcap Fund, which have returned 21.30% and 21.12% respectively.
Why do you get better profits?
Unlike large-cap stocks, which are monitored by dozens of global analysts, mid-cap companies trade at true valuations before they attract the attention of institutional investors. This gives fund managers an opportunity to make good profits as the companies grow. This is why mid-cap funds are among the best performing categories of mutual funds and have delivered an average CAGR of 15% over the last 5 years.
