Best Mid Cap Mutual Funds

Mid-cap mutual funds are popular investment options that invest in companies with medium-sized market capitalisations. These funds balance high growth potential and moderate risk, making them attractive to investors looking for substantial returns without taking on the extreme volatility often associated with small-cap stocks. Let’s explore the best mid-cap mutual funds, their advantages and disadvantages, and more.

What are the Best Mid Cap Mutual Funds?

Mid-cap mutual funds basically invest in shares of mid-sized companies. According to Indian stock market regulator SEBI's rules, companies with values between 101 and 250 are called mid-cap companies.

These mid-cap companies' value or market capitalisation ranges between ₹5,000 crore to ₹20,000 crore. Their shares have good future growth potential compared to larger firms. Mid caps also face lower risk than very small companies.

These funds are best suited for investors willing to stay invested for the long run, like 5-10 years or more. Mid-cap funds can be considered for achieving financial goals like children's higher education, paying home loans, etc., after many years.

Top 10 Mid Cap Mutual Funds

Here is a table of the top 10 mid-cap mutual funds based on their returns:

Overview of Best Mid Cap Mutual Fund

Here's an overview of each fund:

Motilal Oswal Midcap Fund: This fund has delivered stellar returns due to its focus on quality mid-cap stocks with high growth potential. The fund manager emphasises investing in companies with solid fundamentals, good governance, and sustainable business models.

Quant Mid Cap Fund: Quant Mid Cap Fund is known for its dynamic investment strategy and sectoral diversification. The fund invests in financial, technology, and healthcare sectors, aiming to capture growth opportunities across market cycles.

HDFC Mid Cap Opportunities Fund: One of the most popular mid-cap funds, it has consistently outperformed its peers by focusing on companies with strong business models and sound management. The fund maintains a diversified portfolio to manage risk.

Mahindra Manulife Mid Cap Fund: This fund has been a standout performer due to its strategic selection of mid-cap stocks poised for growth. It actively manages a well-diversified portfolio across various sectors, reducing concentration risk.

Edelweiss Mid Cap Fund: The fund identifies mid-cap companies with a competitive edge and strong market positioning. Its emphasis on growth sectors has resulted in impressive returns, making it a top choice among investors.

Nippon India Growth Fund: Known for its active management approach, it invests in emerging mid-cap companies with solid growth prospects. It has a diversified portfolio, with critical manufacturing, consumer goods, and financial services allocations.

Kotak Emerging Equity Fund: This fund focuses on mid-sized companies that are leaders in their respective industries. It adopts a bottom-up approach to stock selection, emphasising companies with strong financials and growth potential.

Baroda Mid Cap Direct Fund: While returns are relatively lower than its peers, this fund maintains a conservative approach, focusing on stable mid-cap companies with consistent performance. It’s suited for risk-averse investors seeking moderate exposure.

Invesco India Mid Cap Fund: This fund emphasises a balanced approach between growth and value stocks, investing in mid-cap companies with robust earnings potential. It is well-diversified across sectors, enhancing its risk-adjusted returns.

ITI Mid Cap Fund: With a high growth focus, ITI Mid Cap Fund invests in innovative and fast-growing mid-cap companies. The fund’s active management style and keen sectoral insights have helped it achieve strong returns.

Advantages of Best Mid Cap Mutual Fund

Here are the benefits of the best mid-cap mutual fund:

High Growth Potential: Mid-cap companies are typically in their growth phase, which can lead to higher returns compared to large-cap companies.

Diversification: Mid-cap mutual funds invest across various sectors, reducing the risk of investing in a single industry.

Balanced Risk and Reward: They offer a balanced approach between the high returns of small-cap funds and the relative safety of large-cap funds.

Professional Management: These funds are managed by professional fund managers who conduct thorough research and analysis, helping investors capitalise on growth opportunities.

Better Long-Term Performance: Historically, mid-cap funds have delivered impressive returns over the long term, making them a good choice for patient investors.

Taxation on the Best Mid Cap Mutual Fund

After all tax deductions, what you earn from mid-cap mutual funds represents your actual income. So, focus on post-tax returns while deciding. To determine taxes, you need to know how mid-cap funds are taxed based on the period of holding:

Tax on Short-Term Gains:
If mid-cap mutual fund units are sold within 1 year, the earning is called Short Term Capital Gain (STCG). You have to pay a 15% tax on these profits.

Tax on Long-Term Gains:
If you withdraw mid-cap fund investment after 1 year or more, it is Long Term Capital Gain (LTCG). Here, gains up to ₹1 lakh are tax-free in a financial year. But you must pay 10% tax on profits above ₹1 lakh per year.

In summary, holding mid-cap funds for over 1 year makes extra gains above ₹1 lakh taxable at a lower 10% rate instead of 15%, improving post-tax income.

Who Should Invest in Mid Cap Mutual Fund?

Long Term Investors
Mid-cap funds need at least 7-10 years to potentially gain full profits, as the shares take time to rise. They are preferable for retirement goals.

Higher Risk Takers
These funds are riskier than large-cap funds. However, investors may later earn higher-than-market-average returns.

Volatility Tolerant Investors
Mid cap share prices fluctuate sharply in the short term, resulting in sudden ups and downs in portfolio values. So, mental preparedness is vital.