Top-performing mid-cap mutual funds in India: 3-year review and investment tips

Mid-cap mutual funds are a popular choice for investors looking to capture growth in rapidly expanding companies while balancing some level of risk compared to small-cap funds. Over the last three years, mid-cap funds have shown impressive returns, driven by India’s economic growth and the strong performance of emerging companies. Here’s a look at some of the top-performing mid-cap mutual funds in India, along with insights into why these funds are a valuable investment option.

What are mid-cap mutual funds?

Mid-cap mutual funds primarily invest in medium-sized companies, typically ranked between 101 and 250 in terms of market capitalization. These companies often show higher growth potential than large-cap companies but with relatively less risk compared to small-cap companies. Mid-cap funds are suitable for investors with a moderate to high-risk appetite and a longer investment horizon, as these funds can be volatile in the short term but tend to offer substantial returns over time.

Why invest in mid-cap mutual funds?

Higher growth potential: Mid-cap companies are usually in the growth phase, offering significant upside potential as they expand their market reach and profitability.

Diversification benefits: Including mid-cap funds in your portfolio provides a balanced approach, blending the stability of large-cap funds with the growth potential of small-cap funds.

Experienced fund management: Mid-cap mutual funds are managed by professional fund managers who perform in-depth analysis to identify high-growth companies with sound fundamentals.

Investing in mid-cap funds requires patience and a focus on long-term gains, as market fluctuations can affect these funds more than large-cap counterparts.

Top-performing mid-cap mutual funds in the last 3 years

Here’s a closer look at some of the best-performing mid-cap mutual funds based on their 3-year returns:

Fund Name

Motilal Oswal Midcap Fund – Direct Plan                                             32.54
Kotak Emerging Equity Fund – Direct Plan                                          22.21
Invesco India Mid Cap Fund – Direct Plan                                            22.67
Edelweiss Mid Cap Fund – Direct Plan                                                   24.39
HSBC Mid Cap Fund – Direct Plan                                                            22.36
HDFC Mid-Cap Opportunities Fund – Direct Plan                            25.48
Sundaram Mid Cap Fund – Direct Plan                                                  22.79
Franklin India Prima Fund – Direct Plan                                              19.74
Nippon India Growth Fund – Direct Plan                                              23.67
Baroda BNP Paribas Mid Cap Fund – Direct Plan                               19.50

Note: Returns as of July 2023. Past performance does not guarantee future results.

Detailed analysis of top-performing funds

Motilal Oswal Midcap Fund – Direct Plan

3-Year Return: 32.54%

Fund Highlights: Known for its growth-oriented investment philosophy, this fund emphasizes quality mid-cap companies with strong potential. The fund has consistently delivered above-average returns, driven by a robust stock-picking strategy.

HDFC Mid-Cap Opportunities Fund – Direct Plan

3-Year Return: 25.48%

Fund Highlights: A popular fund in the mid-cap segment, HDFC Mid-Cap Opportunities Fund focuses on sectors like industrials, consumer goods, and technology. It has a well-diversified portfolio and is managed with a focus on long-term growth.

Edelweiss Mid Cap Fund – Direct Plan

3-Year Return: 24.39%

Fund Highlights: This fund follows a disciplined investment approach, focusing on mid-cap companies with solid growth trajectories. It has a balanced sectoral allocation, providing resilience in market volatility.

Nippon India Growth Fund – Direct Plan

3-Year Return: 23.67%

Fund Highlights: Nippon India Growth Fund is a high-performing fund with a diversified portfolio. Its investments are concentrated in growth sectors like banking, technology, and manufacturing.

Invesco India Mid Cap Fund – Direct Plan

3-Year Return: 22.67%

Fund Highlights: This fund focuses on companies with potential for strong earnings growth. It maintains a balance across sectors and has been effective in navigating volatile market conditions.

Key factors driving performance in mid-cap funds

Sectoral allocation: Top-performing funds often allocate investments to growth-oriented sectors, such as technology, finance, and consumer goods, which have shown strong potential in India’s economic landscape.

Stock selection: Successful mid-cap funds benefit from fund managers’ expertise in picking high-quality mid-cap stocks, focusing on companies with competitive advantages, solid financials, and growth potential.

Long-term investment horizon: Mid-cap funds require patience as they can be sensitive to market fluctuations. Investors who hold on to these funds for a longer period typically see better returns.

Economic growth in India: India’s mid-cap sector has benefited from economic growth, favourable policies, and increasing consumer demand. The growth of the Indian middle class and increased digitalization are additional factors contributing to mid-cap companies’ success.

Tips for investing in mid-cap mutual funds

Assess your risk tolerance: Mid-cap funds are suitable for moderate to high-risk investors with a longer investment horizon. Understand your own risk tolerance before investing.

Research the fund’s track record: Look at the fund’s performance over 5- and 10-year periods, not just recent performance. Consistency is key in mid-cap investments.

Diversify within your portfolio: Avoid putting all your investments in mid-cap funds. Include a mix of large-cap, multi-cap, and debt funds to balance the portfolio.

Stay invested for the long term: To reap the benefits of mid-cap funds, commit to a long-term horizon. Avoid frequent switching or exiting during market corrections.

Consult with a financial advisor: If you’re uncertain about which mid-cap funds to choose, consult with a financial advisor to align your investment choices with your financial goals.

Mid-cap mutual funds can be a rewarding addition to a well-rounded investment portfolio, offering growth potential with a balanced risk profile. However, these funds require a disciplined, long-term approach, as market fluctuations can impact short-term returns. By carefully selecting high-quality mid-cap funds, you can benefit from the growth of emerging companies in India and enhance your overall financial portfolio. Remember to conduct thorough research, understand your risk profile, and consult with a financial advisor to make informed investment decisions.