When a scheme invests minimum 65% in mid cap companies, the fund is called Mid-cap fund. As per recent categorization is done by SEBI, Mid cap stocks are stocks that rank between 100-250 in terms of market capitalization. As compared to large-cap funds, Mid-cap funds are volatile but also have the potential to deliver great returns. Mid cap funds deliver exceptional returns when stock markets are in a bull phase. However, they should be avoided when markets have already run up for a few years. Period between 2013 and 2018, most mid cap funds have outperformed their large cap peers by at least 3 times. As of May 2018, we at RupeeInvest are not advising mid and small cap funds as they are extremely expensive and have also started to correct.
When a scheme invests minimum 65% of its asset size in smaller companies then the fund is called a small cap fund. As per recent SEBI categorization entire universe beyond first 250 stocks (as per market capitalization) comprises small cap companies. Small cap funds are very aggressive investment instruments and in case of a market downturn lose wealth extremely fast. Smaller companies also have a liquidity problem hence at times NAV of the scheme is eroded extremely fast. As of May 2018, we at RupeeInvest recommend that small cap funds should be avoided.
Retail investors look at the returns of the past few years and start investing. That is exactly what is happening now. Past 4-5 years were a dream run for small and midcap schemes. They have given exceptional returns. At times over 30% CAGR for a period between 2013 and 2018. However, investing in these schemes during current times is extremely risky. This is due to the following reasons:
| Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
|---|---|---|---|---|---|---|---|---|
| Quant Small Cap - Growth | Small Cap Fund | 5 | 1,270.60 | 7% | 16% | 90% | 39% | 23% |
| Union Small Cap Fund - Growth | Small Cap Fund | 4 | 564.02 | 6% | 16% | 60% | 31% | 20% |
| Axis Small Cap Fund - Growth | Small Cap Fund | 3 | 7,695.32 | 4% | 17% | 54% | 33% | 24% |
| Sbi small cap fund - Growth | Small Cap Fund | - | 10878.18 | 2% | 13% | 42% | 28% | 24% |
| Scheme Name | Category Name | Crisil Rank | AUM (Cr) | 1 M | 6 M | 1 Y | 3 Y | 5 Y |
|---|---|---|---|---|---|---|---|---|
| PGIM India Midcap Opportunities Fund - Growth | Mid Cap Fund | 5 | 3,584.78 | 6% | 21% | 58% | 37% | 24% |
| Tata Mid Cap Growth Fund - Regular Plan - Growth | Mid Cap Fund | 3 | 1,455.57 | 3% | 13% | 37% | 24% | 19% |
| Axis Midcap Fund - GrowthMid Cap Fund | Mid Cap Fund | 3 | 16,107.43 | 3% | 15% | 38% | 26% | 24% |
| Invesco India Mid Cap Fund - Growth | Mid Cap Fund | 3 | 2,059.46 | 4% | 14% | 39% | 24% | 20% |
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