Top 10 Best Mid Cap Mutual Funds in India: Should You Invest?

This post was most recently updated on March 5th, 2024

Mid cap mutual funds are equity funds that invest in the stocks of mid-sized companies, which have a market capitalization between Rs. 5,000 crore and Rs. 20,000 crore. These companies are typically in the growth phase of their business cycle and have the potential to deliver higher returns than large cap funds. However, they also carry higher risks and volatility than large cap funds, as they are more sensitive to economic and market fluctuations.

Investing in mid cap funds can be rewarding for investors who have a long-term horizon of at least 5 to 7 years and a high risk appetite. Mid cap funds can offer diversification to the portfolio and exposure to emerging sectors and themes. They can also benefit from the economic recovery and growth prospects of India, as mid cap companies are likely to gain market share and scale up their operations.

However, not all mid cap funds are created equal. Various factors affect the performance of mid cap funds, such as the fund manager’s strategy, stock selection, sector allocation, expense ratio, and consistency. Therefore, it is important to do thorough research and analysis before investing in any mid cap fund.

To help you in your investment journey, we have compiled a list of the top 10 best mid cap mutual funds in India, based on their past performance, risk-adjusted returns, ratings, and reviews.

Consider reading: Top 10 Best Small Cap Mutual Funds in India

Top 10 Best Mid Cap Mutual Funds in India

What are Mid Cap Mutual Funds?

When investing in Mid Cap Mutual Funds, it’s essential to understand their core characteristics. These funds primarily focus on companies with market capitalization that falls between large-cap and small-cap companies.

• Mid Cap companies typically have the potential for growth and expansion, positioning them as a crucial segment of the market.
• Investing in Mid Cap Mutual Funds offers the opportunity to tap into the growth potential of mid-sized companies while maintaining a moderate level of risk.
• These funds can provide diversification within an investor’s portfolio, reducing overall risk exposure.

In essence, Mid Cap Mutual Funds cater to individuals seeking a balance between growth potential and risk tolerance, making them a valuable addition to a well-rounded investment strategy.

Consider reading: Top 5 Best Long Duration Mutual Funds in India

Features of a Mid Cap Mutual Funds

When considering Mid Cap Mutual Funds, it’s crucial to understand the unique features that set them apart in the investment world.

Growth Potential

Investing in Mid Cap Mutual Funds offers access to companies with promising growth prospects. These firms are positioned between large-cap and small-cap companies, striking a balance between stability and growth potential.

Moderate Risk

Mid Cap Mutual Funds are known for offering a moderate level of risk compared to small-cap funds. This allows investors to tap into growth opportunities while managing risk exposure effectively.

Diversification Benefits

One key benefit of Mid Cap Mutual Funds is portfolio diversification. By investing in a mix of mid-sized companies, investors can spread risk and reduce exposure to individual stock volatility.

Market Presence

Mid Cap companies play a significant role in the market, contributing to economic growth and innovation. Investing in Mid Cap Mutual Funds aligns investors with these pivotal players in the market.

Balance in Investment Strategy

For individuals seeking a balance between growth potential and risk management, Mid Cap Mutual Funds serve as an ideal choice. They offer the opportunity for growth while maintaining a level of risk tolerance that suits many investors’ preferences.

Overall, Mid Cap Mutual Funds present a compelling investment option for those looking to diversify their portfolio and capitalize on the growth potential of mid-sized companies.

Types of Mid Cap Mutual Funds

When it comes to Mid Cap Mutual Funds, there are several types available, each catering to different investor preferences and risk appetites. Here are some common types you may come across:

• Actively Managed Funds: These funds are managed by fund managers who actively buy and sell investments to outperform the market.
• Index Funds: These funds aim to replicate the performance of a specific market index, offering lower expense ratios compared to actively managed funds.
• Growth Funds: Geared towards capital appreciation, these funds invest in mid-sized companies with high growth potential.
• Value Funds: Focused on undervalued stocks, value funds seek companies that are trading below their intrinsic value.
• Blend Funds: These funds strike a balance between growth and value strategies, providing diversification across various mid-cap stocks.
• Sector-specific Funds: These funds concentrate on particular sectors such as technology, healthcare, or finance, offering investors exposure to industries they believe in.

Feeling overwhelmed by the options? Don’t worry, each type has its unique characteristics to suit different investment goals.

Consider reading: Top 10 Best Multi-Cap Mutual Funds in India

How Does a Mid Cap Mutual Funds Work?

When I invest in a Mid Cap Mutual Fund, I’m essentially pooling my money with other investors to buy a diversified portfolio of mid-sized companies. Here’s how it works:

• Investment Strategy: Mid Cap Funds focus on companies with a market capitalization between $2 billion and $10 billion. These companies have high growth potential and are at a stage where they could outperform larger companies.
• Risk and Return: By investing in mid-sized companies, I’m exposed to moderate risks compared to small-cap funds but have the potential for higher returns than large-cap funds.
• Portfolio Management: Fund managers actively select and manage the portfolio to achieve the fund’s investment objectives, whether it’s capital appreciation, income generation, or a mix of both.
• Performance Tracking: I can track the fund’s performance through its Net Asset Value (NAV) and compare it against relevant benchmarks like the Nifty Midcap 100 or other indices.
• Expense Ratios: It’s important to be aware of the expense ratio, which includes management fees and other operational expenses. Lower expense ratios can lead to higher returns for me as an investor.
• Diversification: Investing in a Mid Cap Mutual Fund allows me to diversify my investment across a spectrum of mid-sized companies, reducing individual stock risk.
• Exit Strategy: If I decide to redeem my investment, I can do so by selling my mutual fund units at the prevailing NAV, subject to any applicable exit loads.

Investing in Mid Cap Mutual Funds offers me the opportunity to tap into the growth potential of mid-sized companies while balancing risks and returns effectively.

How Should You Invest in a Mid Cap Mutual Funds?

When considering investing in a Mid Cap Mutual Fund in India, there are essential steps to follow to make informed decisions tailored to your financial goals. Here’s a breakdown of how you can strategically invest in Mid Cap Funds:

• Assess Your Risk Tolerance: Determine your risk appetite to align your investment choice with your comfort level.
• Set Clear Financial Goals: Define your objectives, whether it’s capital growth, regular income, or wealth preservation.
• Research Fund Options: Explore various Mid Cap Mutual Funds available in India to find the best fit for your investment strategy.
• Evaluate Performance: Analyze past performance, returns, and volatility to gauge the fund’s potential and consistency.
• Consider Fund Expenses: Look into expense ratios to understand the impact on your overall returns.
• Review Fund Manager Expertise: Assess the experience and track record of the fund manager managing the Mid Cap Fund.
• Diversify Your Portfolio: Build a diversified portfolio by combining Mid Cap Funds with other asset classes for risk management.
• Monitor Regularly: Keep track of your investments, review fund performance, and make adjustments as needed to stay on course with your financial objectives.

By following these steps, investing in Mid Cap Mutual Funds in India can be a strategic and rewarding approach to growing your investment portfolio while managing risks effectively.

Why Should You Invest in Mid Cap Mutual Funds?

When considering Mid Cap Mutual Funds as an investment option in Mutual Funds in India, several compelling reasons arise:

• Growth Potential: Mid-sized companies often demonstrate high growth potential compared to large-cap companies.
• Market Capitalization: Mid caps are positioned between small-cap and large-cap companies, offering a balance of growth and stability.
• Diversification: Investing in mid caps adds diversification to your portfolio, spreading out risk.
• Performance: Historically, mid caps have displayed the potential for generating high returns over the long term.
• Market Dynamics: Mid cap companies are well-positioned to capitalize on market trends and economic growth.
• Fund Selection: Choosing the Best Mid Cap Mutual Funds in India can be a strategic move to optimize your investment outcomes.

By considering these factors, investors can harness the growth potential of mid-cap companies while effectively managing risks in their investment portfolios.

Consider reading: Best Arbitrage Mutual Funds in India

Taxation Rules of Mid Cap Mutual Funds

When it comes to taxation rules for Mid Cap Mutual Funds in India, it’s crucial to be aware of the following key points:

• Capital Gains Tax: Gains from Mutual Funds are categorized as short-term and long-term capital gains. This classification impacts the tax rates applied.
• Equity Funds: Mid Cap funds are considered equity funds if they invest at least 65% of their assets in equity and equity-related instruments. This is important for understanding the tax implications.
• Dividend Distribution Tax: Mutual Fund companies pay this tax before distributing dividends to investors. As an investor, you receive the dividend post the deduction of this tax.
• Tax-saving Instruments: ELSS (Equity Linked Saving Schemes) are tax-saving Mutual Funds in the equity category, providing tax benefits under Section 80C of the Income Tax Act.

Being knowledgeable about these taxation rules can assist investors in making informed decisions when investing in Mid Cap Mutual Funds in India.

Advantages of Investing in Mid Cap Mutual Funds

When exploring Mid Cap Mutual Funds in India, it’s crucial to consider the advantages they offer. Here are some key benefits of investing in Mid Cap Mutual Funds:

• High Growth Potential: Mid Cap funds have the potential for significant growth, making them attractive for investors looking to capitalize on emerging opportunities.
• Market Capitalization Positioning: They offer a sweet spot between Large Cap and Small Cap funds, providing a balance of growth potential and stability.
• Diversification Benefits: Investing in Mid Cap Mutual Funds can help diversify your portfolio and reduce risk by spreading investments across different sectors and companies.
• Historical Performance: Mid Cap funds have shown strong performance over the years, outperforming Large Cap funds in many instances.
• Potential for Selecting the Best Funds: With careful research and analysis, investors can identify Mid Cap funds that align with their financial goals and risk tolerance.
• Tax Benefits: Some Mid Cap Mutual Funds offer tax-saving opportunities, such as investing in Equity Linked Savings Schemes (ELSS) under Section 80C of the Income Tax Act.

With these advantages in mind, investing in Mid Cap Mutual Funds can be a strategic move to diversify your portfolio and potentially achieve attractive returns.

Things to Consider Before Investing in Mid Cap Mutual Funds

When investing in Mid Cap Mutual Funds, it’s crucial to carefully assess the following aspects:

• Risk Tolerance: Evaluating your risk tolerance is essential as Mid Cap funds can be more volatile than Large Cap funds.
• Investment Goals: Define your investment goals clearly to align them with the growth potential of Mid Cap Mutual Funds.
• Historical Performance: Review the historical performance of the funds to gauge their consistency over time.
• Expense Ratio: Consider the expense ratio as lower expenses can have a significant impact on overall returns.
• Fund Manager: Research the fund manager’s track record to ensure you’re comfortable with their investment style.
• Asset Allocation: Understand the asset allocation strategy of the fund to ensure it aligns with your risk profile.

Always conduct thorough research and, if needed, consult with a financial advisor to make well-informed decisions about Mid Cap Mutual Fund investments.

Final Thoughts on Top 10 Best Mid Cap Mutual Funds in India

Mid cap mutual funds can be a rewarding investment option for investors who are willing to take higher risks for higher returns. They can offer exposure to the growth potential of mid-sized companies, which are likely to benefit from the economic recovery and growth prospects of India. However, they also require careful research and analysis, as they are more volatile and sensitive to market fluctuations than large-cap funds.

We have presented the top 10 best mid cap mutual funds in India for 2024, based on their past performance, risk-adjusted returns, ratings, and reviews. These funds have shown consistent and superior performance over the long term and have outperformed their benchmark and category average. They have also demonstrated resilience during market downturns and have a well-diversified portfolio of quality stocks.

However, before investing in any of these funds, investors should consider their own risk profile, investment horizon, and financial goals. They should also monitor the performance of these funds regularly and review their portfolio periodically. Investing in mid cap funds can be rewarding, but it also requires patience and discipline. Happy investing!

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FAQs on Top 10 Best Mid Cap Mutual Funds in India

Which mid-cap mutual fund is best in India?

Identifying the best mid-cap mutual fund in India involves considering factors like past performance, fund manager expertise, and investment strategy. As of the latest data, Axis Midcap Fund and DSP Midcap Fund often rank high among financial experts. However, individual suitability should be assessed based on investment goals and risk tolerance.

Which mid-cap mutual fund has the highest return in the last 5 years?

The mid-cap mutual fund with the highest return in the last five years varies as markets fluctuate. However, historically, funds like HDFC Mid-Cap Opportunities and Kotak Emerging Equity have performed well. Always check the latest data on a reliable financial news site for the most recent top performer.

Is mid-cap mutual fund safe in India?

Mid-cap mutual funds in India come with moderate to high risk, as they invest in companies with potential for growth but more volatility. They’re generally safer for investors who can withstand market fluctuations and have a long-term perspective, ideally over 8-10 years, for potential wealth creation.