Highest Returns Mutual Fund in the Last 10 Years – Mid Cap Fund Category

August 29, 2024 Mutual Fund

Positive sentiment continues to grip the Indian equity market despite global uncertainties. As a result, the BSE Mid-cap index has registered a strong rally and delivered gains of 31.2% so far in the current calendar year, outpacing the gains of 12.2% in BSE Sensex. Notably, this comes after the index gained 45.5% in 2023.

Mid-cap stocks offer an attractive investment proposition as they carry allocation to emerging and niche stocks and sectors that have the potential to become bluechips of tomorrow, which gives them high upside potential.

Besides, factors such as India’s robust economic fundamentals, healthy corporate balance sheet, and the strong influx of new retail investors (especially via the SIP route of mutual funds), over the past few years have been among the key factors driving the rally in mid-cap stocks.

Amid the stellar rally in the mid-cap segment, Mid Cap Fund has been one of the top-performing categories among diversified equity mutual funds. In this article, explore the highest return mutual funds in the last 10 years from the Mid Cap Fund category, selected based on SIP returns.

Highest Return Mid Cap Fund in the Last 10 Years #1: Quant Mid Cap Fund

Incepted in February 2001, Quant Mid Cap Fund is a Mid Cap Fund that follows aggressive investment strategies. It follows an active investment approach whereby it constantly hunts for (its current turnover ratio is over 300% in the last one year) attractive opportunities by focusing on ‘buy on dips’ strategy. The fund is sector and benchmark agnostic. This means the weightage of stocks and sectors in the portfolio will not be guided by the benchmark index. The fund’s strategy of timely identifying attractive-looking stocks and sectors and taking higher exposure in them has worked extremely well in its favour in the last few years, which helped it record extraordinary growth across time frames. Its asset size has grown by about 15 times in the last two years to Rs 9,283 crore.

Performance of Quant Mid Cap Fund

Past performance is not an indicator of future returns. The securities quoted are for illustration only and are not recommendatory
Data as of August 23, 2024
Returns are XIRR in percentageMonthly SIP of Rs 10,000 over a 10-year period in Direct plan – Growth option considered
(Source: ACE MF, data collated by PersonalFN) 

In the last 10 years, Quant Mid Cap Fund grew at an XIRR of 26.9% compared to a growth of 24.1% in its benchmark Nifty Midcap 250 – TRI. A monthly SIP of Rs 10,000 over a 10-year period (i.e. total investment of Rs 12,00,000) in the fund would now be valued at Rs 50,09,632.

Top holdings of Quant Mid Cap Fund

Portfolio data as of July 31, 2024
(Source: ACE MF, data collated by PersonalFN) 

Quant Mid Cap Fund is selective in stock picking and holds a compact portfolio of about 20-30 stocks. As of July 31, 2024, the fund held 24 stocks with the top 10 stocks accounting for 64.5% of its assets. It also held some exposure to Derivatives – Futures. The fund currently has higher allocation to Aurobindo Pharma, Reliance Industries, Container Corporation of India, IRB Infrastructure Developers, and SAIL. Unlike many of its peers, Quant Mid Cap Fund does not shy away from holding higher exposure of more than 5% in each mid-cap stocks, neither does it hesitate from holding unconventional bets.

Highest Return Mid Cap Fund in the Last 10 Years #2: Motilal Oswal Midcap Fund

Launched in February 2014, Motilal Oswal Mid Cap Fund aims to invest in quality businesses with reasonable long-term growth potential and are available at a fair price. The scheme follows an active investment style and its portfolio turnover usually ranges between 130-170%, signifying high portfolio churning compared to many of its peers. It seeks to invest in mid-cap companies with a strong competitive position or economic moat, good business prospects, and run by a competent management team. The fund does not hesitate to hold high cash balance during uncertain market conditions. While the fund has occasionally outperformed the benchmark and category average during various market phases in the past, it has emerged as a top performer in the category over long-term time frames.

Performance of Motilal Oswal Mid Cap Fund

Past performance is not an indicator of future returns. The securities quoted are for illustration only and are not recommendatory
Data as of August 23, 2024
Returns are XIRR in percentageMonthly SIP of Rs 10,000 over a 10-year period in Direct plan – Growth option considered
(Source: ACE MF, data collated by PersonalFN) 

In the last 10 years, Motilal Oswal Midcap Fund grew at an XIRR of 25.9% compared to a growth of 23.4% in its benchmark Nifty Midcap 250 – TRI. A monthly SIP of Rs 10,000 over a 10-year period (i.e. total investment of Rs 12,00,000) in the fund would now be valued at Rs 47,25,674.

Top holdings of Motilal Oswal Mid Cap Fund

Portfolio data as of July 31, 2024
(Source: ACE MF, data collated by PersonalFN) 

Motilal Oswal Mid Cap Fund holds a compact portfolio of 25-30 stocks. As of July 31, 2024 the fund held 24 stocks in its portfolio with the top 10 stocks account for a major 64.4% of its assets. The fund also holds substantial exposure to large-cap stocks for stability. Its current top holdings include Polycab India, Persistent Systems, Kalyan Jewellers India, JIO Financial Services, and Coforge. Even though Motilal Oswal Mid Cap Fund frequently churns its portfolio, some of its high conviction stocks such as Tube Investments of India, Voltas, Max Healthcare Institute, and The Phoenix Mills, have been part of its portfolio for around two years or more.

Highest Return Mid Cap Fund in the Last 10 Years #3: Edelweiss Mid Cap Fund

Launched in December 2007, Edelweiss Mid Cap Fund is a growth-oriented Mid Cap Fund. Prior to 2018, the fund was known as Edelweiss Mid and Small Cap Fund under which it maintained an on-par exposure across mid-cap and small-cap stocks. After its recategorisation to Mid Cap Funds in 2018 it maintains a minimum exposure of 65% in mid-cap stocks at all times. It aims to identify strong and quality businesses having good earnings growth potential, profitable products and services, and are run by good management. Edelweiss Mid Cap Fund has consistently registered above-average growth over the long-term time frames. Its performance is particularly commendable during market rallies wherein it has regularly maintained a decent lead over the category average, while it has also stood strong during bearish phases.

Performance of Edelweiss Mid Cap Fund

Past performance is not an indicator of future returns. The securities quoted are for illustration only and are not recommendatory
Data as of August 23, 2024
Returns are XIRR in percentageMonthly SIP of Rs 10,000 over a 10-year period in Direct plan – Growth option considered
(Source: ACE MF, data collated by PersonalFN) 

In the last 10 years, Edelweiss Mid Cap Fund grew at an XIRR of 24.9% compared to a growth of 23.4% in its benchmark Nifty Midcap 250 – TRI. A monthly SIP of Rs 10,000 over a 10-year period (i.e. total investment of Rs 12,00,000) in the fund would now be valued at Rs 44,92,697.

Top holdings of Edelweiss Mid Cap Fund

Portfolio data as of July 31, 2024
(Source: ACE MF, data collated by PersonalFN) 

Edelweiss Mid Cap Fund invests with a long-term view and thus carries less aggressive turnover ratio of around 50%. It remains fully invested in equities with its cash component comprising less than 5% of its assets in the last one year. The fund has capped exposure in each stock to under 5%. As of July 31, 2024, Edelweiss Mid Cap Fund held a diverse portfolio of 72 stocks with the top 10 stocks accounting for 29% of its assets. Its top holdings is in popular mid-cap names such as Persistent Systems, Dixon Technologies (India), Indian Bank, and Cummins India.

Highest Return Mid Cap Fund in the Last 10 Years #4: Nippon India Growth Fund

Launched in October 1995, Nippon India Growth Fund is one of the oldest and most popular schemes in the Mid Cap Fund category. The fund avoids investing in momentum-driven bets and instead focuses on quality stocks available at reasonable valuations and holds them with a long-term view. It aims to identify emerging/niche trends and scalable businesses to generate high alpha by following the bottom-up stock selection. The fund invests about 30% of its assets in stocks of large-cap and small-cap companies for diversification. While in the past the fund often trailed the category average and the benchmark, its performance over the last few years has been commendable. It now stands among the top quartile performers in the category across time frames and is much ahead of the benchmark.

Performance of Nippon India Growth Fund

Past performance is not an indicator of future returns. The securities quoted are for illustration only and are not recommendatory
Data as of August 23, 2024
Returns are XIRR in percentageMonthly SIP of Rs 10,000 over a 10-year period in Direct plan – Growth option considered
(Source: ACE MF, data collated by PersonalFN) 

In the last 10 years, Nippon India Growth Fund grew at an XIRR of 24.3% compared to a growth of 23.4% in its benchmark Nifty Midcap 250 – TRI. A monthly SIP of Rs 10,000 over a 10-year period (i.e. total investment of Rs 12,00,000) in the fund would now be valued at Rs 43,38,896.

Top holdings of Nippon India Growth Fund

Portfolio data as of July 31, 2024
(Source: ACE MF, data collated by PersonalFN) 

From 2018 onwards, Nippon India Growth Fund has shifted from its earlier multi-cap strategy and now focuses on investing predominantly in mid-cap stocks (minimum 65% of its assets). It also invests up to 35% of its assets in stocks of mid-cap and large-cap companies for diversification. As of July 31, 2024, Nippon India Growth Fund held a large portfolio of 95 stocks in its portfolio with the top 10 stocks accounting for about 23% of its assets. It follows a buy-and-hold strategy and is currently bullish on Power Finance Corporation, Cholamadalam Financial Holdings, Persistent Systems, The Federal Bank, and Voltas.

Highest Return Mid Cap Fund in the Last 10 Years #5: Kotak Emerging Equity Fund

Incepted in March 2007, Kotak Emerging Equity Fund is a well-managed scheme in the Mid Cap Mutual Fund segment that has performed consistently well across market phases in the past. Focusing on high-conviction bets picked by utilising a bottom-up investment strategy, it has the potential to generate market-beating returns in the long run and reward its investors with noteworthy risk-adjusted returns. During the mid-cap crash of 2018-19 and the market turbulence of 2020, Kotak Emerging Equity Fund displayed remarkable strength, distinguishing itself from many of its peers who struggled to keep pace with the market returns. Moreover, the fund also outpaced several of its peers in the ongoing bull phase. This impressive performance has solidified its position as one of the top performers within the Mid Cap Fund category in the long run.

Performance of Kotak Emerging Equity Fund

Past performance is not an indicator of future returns. The securities quoted are for illustration only and are not recommendatory
Data as of August 23, 2024
Returns are XIRR in percentageMonthly SIP of Rs 10,000 over a 10-year period in Direct plan – Growth option considered
(Source: ACE MF, data collated by PersonalFN) 

In the last 10 years, Kotak Emerging Equity Fund grew at an XIRR of 23.8% which is marginally higher growth of 23.4% in its benchmark Nifty Midcap 250 – TRI. A monthly SIP of Rs 10,000 over a 10-year period (i.e. total investment of Rs 12,00,000) in the fund would now be valued at Rs 42,35,021.

Top holdings of Kotak Emerging Equity Fund

Portfolio data as of July 31, 2024
(Source: ACE MF, data collated by PersonalFN) 

Kotak Emerging Equity Fund usually holds a diverse portfolio with a long-term view, and generally invests in over 70 stocks spread across 20 sectors. As of July 31, 2024, the fund held 65 stocks in its portfolio with the top 10 stocks together constituting around 29% of its assets. Its core holdings include Persistent Systems, Mphasis, Supreme Industries, Oil India, and Oberoi Realty. The fund manager typically has conviction in some of the core stock holdings in the portfolio and accordingly, Kotak Emerging Equity Fund usually records a low turnover of less than 5%, though it has gone up to 15-35% in recent months.

Final thoughts

Mid Cap Funds have outperformed Large Cap Funds, rewarding investors with remarkable gains. A large number of mid-cap stocks are now trading near all-time high levels, driven by strong inflows from domestic investors. Moreover, certain pockets of the mid-cap segment appear to have run ahead of fundamentals, indicating overvaluation.

Notably, Mid Cap Funds can potentially continue to exhibit strong growth over the long run supported by robust GDP and corporate earnings growth. However, in the near term, the segment may witness high volatility and even see some correction amid worries about slow consumption growth, geopolitical tensions, rate hike actions by global central banks, among other factors.

[Read: Sensex at 80,000! How to Approach Equity Mutual Funds Now]

It is important to note due to the mid-cap index trading near all-time high level and expensive valuations, the possibility of earning massive returns in the near future may be limited. Since the downside risk and volatility associated with mid-cap stocks tends to be high compared to large-cap stocks, investors need to assess their holdings in Mid Cap Funds to ensure that they do not go overboard with the investments.

Thus, in the current market environment, only those with the ability to tolerate market fluctuations and having a long-term investment horizon of at least 5-7 years should consider investing in Mid Cap Funds.

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Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

This article first appeared on PersonalFN here