Best Mid-Cap Mutual Funds for Investment in Sep 2024
High valuations in the mid-cap space are perturbing many a mutual fund investor. In the last few months, mid-cap stocks have rallied pretty strongly. This has resulted in high returns for investors in mid-cap funds. In fact, mid-cap funds returned an average of 32.23% in 2023. Strong performance has also made some investors nervous about the sustainability of such gains. So, what should investors do now?
Understanding Mid-Cap Funds
Before answering that, it would be useful to go back to some basics about mid-cap funds. The schemes invest in mid-cap stocks; these stocks are of companies of medium sizes. As per the SEBI guideline, the mid-cap schemes have to invest in companies with a ranking between 101st and 250th in market capitalization. Such companies are perceived as potential leaders and hence are investment points. If these companies tend to live up to their expectations, then they surprise investors in massive proportions.
The risk is also high when such companies fail to live up to expectations. The market typically punishes underperforming companies, and the results can be quite harsh-especially for those companies with management practices or corporate governance in question. It is thus intrinsically risky to invest in mid-cap companies. As a mutual fund investor, it is important not to ignore these risks. However, matching mid-cap funds as an investment portfolio would best fit with those having a high tolerance for risk and a longer time horizon, say between seven to ten years. A longer duration gives room for investors in case of the inevitable volatility.
Investors should, therefore, adopt caution as mid-cap valuations have reached current peaks. This is definitely not a time to be on the greed of quick gains. It will be prudent to continue regular investments besides being prepared for volatility and short-term losses.
So, there are some nice funds for investors whose investment objectives and appetite for risk match with the objectives of mid-cap schemes. Ideally, one should check this list of funds periodically to see if they still meet your investment objectives.
Recommended Mid Cap Mutual Funds for September 2024
1. Axis Bluechip Fund
Axis Bluechip Fund is amongst the best-performing large-cap mutual funds that have delivered exceptional performance in the long term. The fund is managed by Axis Mutual Fund and majorly invests the corpus in large-cap companies that are well-established and financially sound. The investment strategy of the fund involves investing in high-quality stocks that have a growth potential and are expected to yield stable returns in the long run. Axis Blue Chip Fund is recommended to those investors who look for stability with moderate risk for their equity investments and have a diversified portfolio across different sectors.
2. Canara Robeco Bluechip Equity Fund
Canara Robeco Bluechip Equity Fund falls in the large-cap funds category that emphasizes investments in top-performing blue-chip companies. This fund from the house of Canara Robeco Mutual Fund aims to offer its investors long-term capital appreciation by investing in financially strong and sound companies with a big market presence. It follows a disciplined process of balancing growth and value stocks to achieve the optimal return with minimal risk. This scheme, thus, is ideal for those investors who seek periodic returns through a high-quality large-cap portfolio.
3. Mirae Asset Large Cap Fund
Mirae Asset Large Cap Fund features among the best large-cap funds owing to its effective highlight of large-cap companies with robust fundamentals. Managed by Mirae Asset Mutual Fund, this fund invests in proven industry leaders so that growth balances with stability. This fund follows a strategy of careful stock selection and sectoral allocation to perform better than the benchmark over long periods. It is the right scheme for investors who have a long-term approach toward investment with a sustainable model of risk management and wealth creation by investing in leading companies.
4. Baroda BNP Paribas Large Cap Fund
Baroda BNP Paribas Large Cap Fund invests in a portfolio of the best large-cap companies. The scheme is from the house of Baroda BNP Paribas Mutual Fund, and the emphasis is on established companies that have performed steadily over some time. The investment philosophy of the fund is to identify those companies that promise long-term growth with competitive advantages. The investment objective of the Baroda BNP Paribas Large Cap Fund is to provide steady capital appreciation by investing in a diversified portfolio comprising large-cap stocks. This fund would be ideal for conservative investors.
5. Edelweiss Large Cap Fund
Edelweiss Large Cap Fund invests in large-cap equity and its related securities to provide investors with long-term capital appreciation. The scheme mainly intends to invest its assets in large and well-established companies of different sectors and belongs to Edelweiss Mutual Fund. The investment approach of the scheme is to select only those companies that have strong fundamentals and a proven track record of generating consistent returns. This fund seeks long-term capital appreciation with relatively lower risk; hence, it is a dependable scheme for risk-averse investors desiring stable returns.
Methodology Behind Fund Selection
The mentioned mutual funds have been selected based on an in-depth methodology:
1. Mean Rolling Returns: The funds have been evaluated on the basis of mean rolling returns generated on a daily basis over a period of three years.
2. Consistency: To analyze the consistency of each fund, Hurst Exponent (H) has been used to measure the randomness of the NAV series of the fund. A higher value of H signifies that volatility will come down and also reflects on the trend getting stronger.
- H = 0.5: The returns follow a geometric Brownian time series and hence are unpredictable.
- H < 0.5: The returns are mean reverting.
- H > 0.5: The returns are persistent; the trend will be stronger when H is higher.
3. Downside Risk: It considers only the negative returns. The downside risk was computed to gauge the magnitude of loss that each fund could incur.
4. Returns relative to Market Expectations: Calculated through Jensen’s Alpha on a three-year basis, the excess risk-adjusted returns made by a fund are gauged against market expectations. Alpha is a measure that conveys by how much a fund has performed over and above the return estimated by the Capital Asset Pricing Model. A higher Alpha would mean excess returns greater than what was estimated by the CAPM.
5. Asset Size: Only those Equity Funds that had at least an asset size of Rs 50 crore were chosen.
Conclusion
These funds have been carefully selected based on their historical performance, risk management, and future growth potential. These funds would be monitored in due course of action, with their performance tracked as an investor would need to make those changes in his portfolio to keep them congruent with his long-term goals of investing.
