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Unlocking mid-cap mysteries: How to invest in mid-cap mutual funds

When it comes to investing in equity mutual funds, selecting the scheme that aligns with the appropriate market capitalization is crucial for achieving your investment goals. Gaining knowledge of a company’s market capitalization can help you assess the advantages and disadvantages of investing in it.

Equity mutual fund schemes are categorised based on the market capitalisation of the companies they aim to invest in. In this article, we’ll explore mid-cap mutual funds and discuss the important aspects of these investment vehicles. 

What is a mid-cap fund?

Mid-cap mutual funds dedicate a minimum of 65% of their funds to mid-cap stocks. Stocks with a market capitalization ranging from the 101st to the 250th percentile are considered mid-cap stocks according to SEBI. This would be a market cap of around ₹5,000 to ₹20,000 crore each.

It is possible for mid-cap companies to expand into large-cap ones. Still, there are advantages and disadvantages to every possible scenario. A midcap firm is poised to transform into a major corporation. Nevertheless, obstacles may also arise.

Mid-cap funds are typically a good fit for investors who have a long-term investment perspective maybe 3-4 years. As such, they can be an effective tool for achieving long-term objectives such as funding your child’s higher education or paying off your home loan.

Here is a list of a few of the mid-cap index funds currently available in India:

AUM (₹ crores)YTD return5Y return
HDFC Mid-Cap Opportunities Fund – Direct Plan-Growth60,417.997.74%24.27%
Kotak Emerging Equity Fund – Direct Plan-Growth39,684.916.14%23.72%
Axis Midcap Fund – Direct Plan-Growth25,536.687.49%22.02%
Nippon India Growth Fund – Direct Plan-Growth24,796.003.87%25.10%

To understand better, let’s delve into the returns and comparables of one of these funds – HDFC Mid-Cap Opportunities Fund – Direct Plan-Growth as shown in the chart below. The YTD returns from the fund are compared with the returns from the S&P BSE 150 MidCap TRI and the Equity: Mid Cap.

The S&P BSE 150 MidCap TRI is an index that represents the total return (including dividends) of 150 mid-sized companies listed on the Bombay Stock Exchange. The Equity: Mid Cap represents investments in medium-sized companies.

 investments in medium-sized companies

Advantages of investing in mid-cap mutual funds

  1. Growth potential: The growth potential of mid-cap funds is higher than that of larger corporations. Investors may have the chance to earn moderate returns from this.
  2. Diversification: One way to reduce the dangers of investing in just one industry or stock is to put your money into a mid-cap fund that spreads your money around to many industries.
  3. Long-term investment: Investors may find it beneficial to incorporate mid-cap funds into their portfolios to help achieve long-term investment objectives such as debt repayment or funding their children’s college education.

Risks of investing in mid-cap mutual funds

  1. Market volatility: Mid-cap stocks often go through notable price swings, resulting in increased volatility in fund performance.
  2. Growth uncertainty: Although mid-cap companies have growth potential, their future success is not guaranteed, which can present investment risks.
  3. Liquidity concerns: It could be difficult to acquire or sell big quantities of these stocks without drastically affecting the market price due to their smaller trading volumes.
  4. Impact of economic cycles: Fund returns may take a hit when investing in mid-cap companies because of their sensitivity to economic downturns.

How to invest in mid-cap mutual funds

If done well, investing in mid-cap mutual funds can yield satisfying results. To put money into mid-cap mutual funds, follow these steps:

  1. Research: Begin your research by exploring different mid-cap mutual funds. Think about the investing strategy, past results, and experience of the fund management.
  2. Choose the right fund: Select the mid-cap mutual fund that best suits your investment objectives and risk tolerance based on your analysis.
  3. Decide on the investment mode: Investors can make a one-time lump sum investment in mid-cap mutual funds or opt for a Systematic Investment Plan (SIP) to invest smaller amounts regularly.
  4. Register online: To begin investing, go to the mutual fund’s website or app and fill out the KYC form. Once these steps are completed, your investment is set up and ready to go.
  5. Monitor your investment: Regularly monitoring your investment helps make informed decisions about continuing, switching funds, or adjusting strategy.

Recent surge

Small and mid-cap funds have witnessed significant inflows, which have raised concerns among regulatory authorities. The apprehension revolves around the potential impact on these funds in the event of a sharp market selloff. 

SEBI, the securities market regulator in India, is likely to monitor the situation closely, given the risks associated with high inflows and market volatility.


Mid-cap mutual funds provide investors with a distinctive investment opportunity, striking a balance between growth potential and risk. They are perfect for those who want to create money over the long term and have an investment horizon of several years.

Investors have the option to select either lump sum or SIP modes of investment. It is essential to thoroughly research and select the appropriate fund, complete the online registration process, and consistently monitor the investment. 

A person’s risk tolerance and financial objectives should guide all investment decisions.


How do I choose a mid-cap mutual fund?

Choosing a mid-cap mutual fund involves careful research. Consider factors like the fund’s historical performance, the expertise of the fund manager, and the fund’s investment strategy. Look at the fund’s portfolio to ensure it aligns with your investment goals and risk tolerance. Regularly monitor the fund’s performance to make informed decisions about your investment. Always remember, that every investment should align with your financial goals.

Which SIP is best small-cap or mid-cap?

The choice between a small-cap or mid-cap SIP depends on your risk appetite and investment horizon. Small-cap SIPs invest in smaller companies with high growth potential but come with higher volatility. Mid-cap SIPs, on the other hand, invest in medium-sized companies that offer a balance of growth and stability. It’s crucial to align your choice with your financial goals and risk tolerance.

Should I invest in one SIP or multiple?

Investing in one or multiple SIPs depends on your financial goals and risk tolerance. A single SIP in a diversified mutual fund can offer adequate diversification. However, investing in multiple SIPs across different fund categories like large-cap, mid-cap, small-cap, etc., can help spread risk and potentially offer better returns. It’s crucial to maintain a balanced portfolio aligned with your investment objectives.

Can we buy the same mutual fund twice?

Yes, you can buy the same mutual fund multiple times. Each purchase is considered a separate investment with its own cost basis and holding period. This allows you to invest additional money in the fund at different times and different NAVs (Net Asset Values). However, it’s important to consider factors like your investment goals, risk tolerance, and the fund’s performance before making additional investments.

What is NAV in mutual funds?

The Net Asset Value (NAV) in a mutual fund is the price per share of the fund. It’s calculated by subtracting the fund’s liabilities from its assets and dividing by the number of outstanding shares. NAV changes daily based on the value of the fund’s underlying assets. It’s the price at which investors buy (“bid price”) or sell (“ask price”) shares in the fund.

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