Top Mid Cap Mutual Funds to Consider for Investment in October 2024
Many mutual fund investors are concerned about the valuations in the mid-cap segment due to the recent strong rally in mid-cap stocks. This surge has resulted in substantial returns for investors in mid-cap funds, with an average return of 32.23% in 2023.
Mid-cap mutual funds mainly invest in stocks of medium-sized companies. According to SEBI regulations, mid-cap funds are required to invest in companies ranked between 101 and 250 in terms of market capitalisation. These firms are often seen as upcoming future market leaders, making them attractive investments. If these companies perform well, investors are likely to be rewarded significantly by the market.
However, there is always some level of danger involved. If these companies are not able to fulfill what they promise, it may lead to severe punishment by the market. In fact, several mid-cap as well as small-cap companies suffer from the issue of poor corporate governance, which leads to severe market punishments whenever problems arise in these firms. Thus, investments in mid-cap companies come with a lot of risk.
It is only fit that such investors be cautioned on these risks. Actually, mid-cap funds are better suited for those highly risk-tolerant investors who have a long investment horizon of at least seven to ten years. This would allow investors a better withstanding of the swings of the pendulum in the market.
Considering that mid-cap valuations are at relatively high levels, investors have to be cautioned against aggressive time-sensitive gains. Investors are advised to continue with the regular investment but also have to bear the short-term losses and volatility.
Recommended Mid-cap Funds for October 2024
The funds that have been selected for October 2024 to an investor who is looking to invest in mid-cap schemes considering their financial goals are as follows:
- Axis Midcap Fund
- PGIM India Midcap Opportunities Fund
- Invesco India Midcap Fund
- Kotak Emerging Equity Fund
- Tata Midcap Growth Fund
The criteria for selection of these funds are as follows:
1. Mean Rolling Returns: This is computed on a daily basis over the last three years for performance purposes.
2. Consistency: Hurst Exponent or H measures consistency. The greater the value for H, the lesser the volatility. A low H would mean extremely unpredictable returns. Any fund whose value of H is more than 0.5 is highly persistent and most likely to follow a stronger trend.
3. Downside Risk: This measures only the negative returns provided by a scheme. Funds are analyzed in terms of periods of market decline.
4. Outperformance: Calculated using Jensen’s Alpha, which measures the risk-adjusted return of a fund relative to what it was expected to generate if it had simply tracked the market. The higher is the Alpha, the better the performance of the fund in comparison with the market expectations.
5. Asset Size: For Equity Funds, the minimum size is stipulated to be Rs.50 crore only.
By implementing these guidelines, investors will make proper decisions in their mid-cap investments, and it will be easier to overcome the risks found in such a volatile market section.
