Mutual fund investors appear to be on a portfolio diversification drive. Data from the Association of Mutual Funds in India (AMFI) shows that investors have been opting for flexi-cap and mid-cap funds in an attempt to diversify their portfolios, which were previously dominated by large-cap and small-cap mutual funds.
The AMFI data shows that while flexi-cap mutual funds topped the charts, where inflows increased from ₹7,029 crore in September this year to ₹8,929 crore in October, the inflows in midcap mutual funds were ₹3,807 crore, the second highest amongst all equity funds.
The data shows a fall of close to 19 per cent in net inflows in equity mutual funds. The biggest losers in equity mutual funds have been large-cap and small-cap funds, with investors preferring to invest their money in flexi-cap and mid-cap mutual funds instead.
Mid-cap funds find favour
While flexi-cap mutual funds continue to dominate, it’s the mid-cap mutual fund category that is gaining interest. Since midcaps are also part of the flexi cap portfolio, market analysts believe that this category stands out for its performance.
For example, in the last three years, Nippon India Growth Midcap Fund has given a handsome 25.13% return, at a time when most equity funds are lagging.
In the same period, UTI Midcap Fund and DSP Midcap Fund have clocked in 21.22% and 18.44% returns, respectively.
Interestingly, in the last three years, of the 35 mid-cap funds across AMCs, just five mid-cap funds have given less than 20% returns, with the lowest still above 15%, reflecting the solid performance of the mid-cap fund category.
The Nippon India Growth Mid Cap Fund, which was launched more than 30 years ago, has given an impressive CAGR of 22.28% since inception. The fund invests in companies that deliver above-average growth and have the potential to generate substantial returns over time.
The reason for the success of the fund could be a well-defined investment process, stringent risk management and in-depth research. In comparison, the Franklin Mid Cap Fund, which completes 33 years on December 1, has given a return of 19.21% since inception.
Mid-cap funds are ideal for long-term investments, and since they prioritise capital appreciation, investors get a steady increase in the value of their investments over time. Besides, mid-cap funds offer diversification across sectors, which helps mitigate risk.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
