Invesco India Mid Cap Fund: Limiting Downside through Quality Mid-Cap Stocks

Apr 07, 2022

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Mid-cap Funds have generated significant gains in the last couple of years. A majority of schemes in the category have outpaced their Large-cap peers by a significant margin during this period.

As you may know, Mid-cap Funds have higher upside potential and the ability to create significant wealth for their investors. These funds tend to outperform Large-cap Funds during bull market phases. However, Mid-cap Funds are not as resilient during bear phases and may plunge lower than Large-cap Funds. Therefore, it is important to select Mid-cap Funds that can stand strong even during uncertain and volatile market conditions.

Invesco India Mid Cap Fund is one such fund that has stood strong besides its large-sized peers in the mid-cap category and performed consistently well across market conditions.

Graph 1: Growth of Rs 10,000 if invested in Invesco India Mid Cap Fund 5 years ago

Launched in April 2007, Invesco India Midcap Fund is a growth-oriented midcap-biased fund that focuses on investing in stocks of high-quality mid-sized companies. Despite having a small corpus size of Rs 2,262crore, the fund has recorded healthy growth in the last few years. Invesco India Mid Cap Fund outperformed the benchmark S&P BSE 150 MidCap – TRI index and many of its peers during the 2018 midcap crash as well as the recent 2020 market crash. This signifies its ability to perform well under pressure and reflects the potential it carries to deliver superior returns for its investors in the long run. Meanwhile, it has managed to generate reasonable alpha during the bull market phases in the past. By generating a compounded annualised return of around 17.8% over the past 5 years, Invesco India Mid Cap Fund has outpaced its benchmark S&P BSE 150 MidCap – TRI index by a CAGR of around 1.5 percentage points. An investment of Rs 10,000 in the fund 5 years back would now be valued at Rs 22,646 compared to a valuation of Rs 21,289 for a simultaneous investment in the benchmark. The fund is benchmark agnostic, and hence its performance may deviate significantly from the index.

Graph 1
Past performance is not an indicator of future returns
Data as on April 06, 2022
(Source: ACE MF)

Table: Invesco India Mid Cap Fund's performance vis-á-vis category peers

Scheme Name Corpus (Cr.) 1 Year 2 Year 3 Year 5 Year 7 Year Std Dev Sharpe
PGIM India Midcap Opp Fund 4,360 40.85 79.57 35.84 20.92 16.86 24.41 0.33
Quant Mid Cap Fund 361 51.70 78.23 33.52 23.30 16.91 23.86 0.30
Kotak Emerging Equity Fund 17,380 29.90 63.16 25.39 17.20 17.25 23.36 0.25
Axis Midcap Fund 16,518 28.45 48.70 25.18 21.17 16.53 18.67 0.28
SBI Magnum Midcap Fund 6,591 32.16 67.47 24.15 14.65 14.42 24.60 0.23
UTI Mid Cap Fund 6,441 28.08 60.11 23.86 15.06 13.61 23.01 0.23
Nippon India Growth Fund 11,531 34.02 61.72 23.69 17.14 15.10 23.98 0.23
Invesco India Midcap Fund 2,262 30.41 54.11 23.30 17.75 15.57 21.92 0.23
HDFC Mid-Cap Opportunities Fund 30,150 27.50 58.35 19.19 14.06 14.78 23.73 0.19
DSP Midcap Fund 13,301 17.18 45.55 18.61 13.35 14.39 20.96 0.19
S&P BSE 150 MidCap- TRI 28.92 64.53 23.40 16.30 15.99 24.87 0.22
Returns are point to point and in %, calculated using the Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on April 06, 2022
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

Invesco India Mid Cap Fund holds a decent long-term performance record. In the last 1-year, 2-year, and 3-year period IIMF has outpaced several prominent peers in the Mid-cap Funds category by a noticeable margin. Over the longer 5-year to 7-year period, Invesco India Mid Cap Fund stands among the above-average performers in the mid-cap fund category and has shown reasonable growth when compared to the benchmark.

With a standard deviation of 21.92%, Invesco India Mid Cap Fund is prone to much lower volatility compared to the category average and the benchmark index. The fund's reasonable performance in the past few years has helped the fund rank higher in terms of risk-adjusted returns. It's Sharpe Ratio of 0.23 is ahead of the benchmark and the category average and indicates its ability to generate a decent premium for the level of risk taken.

Invesco India Mid Cap Fund: Limiting Downside through Quality Mid-Cap Stocks
(Image Source: - photo created by jcomp)

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Investment strategy of Invesco India Mid Cap Fund

Classified under Mid Cap Funds, Invesco India Mid Cap Fund is mandated to invest at least 65% of its assets in equity & equity-related instruments of mid-cap companies. Invesco India Mid Cap Fund aims to invest in high growth-oriented quality stocks of mid-sized companies. It usually holds 65% to 75% of its assets in mid-caps, with another 5% to 20% in small caps and 10% to 20% in large caps. The fund follows a process-based investment strategy and strictly adheres to its mandate and investment philosophy.

Invesco India Mid Cap Fund follows the bottom-up and top-down approach to stock picking with no style bias. While picking stocks, the fund managers look for stocks of companies with high-growth potential. From the large investment universe of midcap stocks, the fund aims to hold a fairly diversified portfolio of around 40 to 50 stocks. Invesco India Mid Cap Fund focuses on companies that have scalable business models, attractive return ratios, strong cash flows and healthy balance sheet position, credible management, among other factors. Since the fund managers constantly hunt for high-growth stocks available at reasonable valuations and look at timely entry and exit, moderate churning in the fund's portfolio cannot be ruled out.

Invesco India Mutual Fund follows a proprietary investment framework, used since the inception of the organization and uses a stock categorization framework to break / bucket stocks into growth and value style of investment. The fund stays fully invested and takes no cash calls.

Graph 2: Top portfolio holdings in Invesco India Mid Cap Fund

Graph 2 Graph 2
Holding in (%) as of February 28, 2022
(Source: ACE MF)

Invesco India Mid Cap Fund holds a well-diversified portfolio of stocks spread across sectors. As of February 28, 2022, the fund held 50 stocks in its portfolio, with the top 10 stocks together constituting around 30.4% of its assets. Notably, the fund has limited exposure in each stock to less than 5%. The top holdings in the portfolio include popular mid-cap names like Persistent Systems, Voltas, Sundram Fasteners, Cholamandalam Investment & Finance Company, and Minda Industries, among others.

Names like L&T Technology Services, Mphasis, Persistent Systems, Minda Industries, Bharat Electronics, KEI Industries, Gland Pharma, and JB Chemicals & Pharmaceuticals contributed the most to the fund's performance in the last one year. In the last one year, the fund's portfolio turnover has ranged between 75% to 95% signifying moderate churning of the portfolio.

Invesco India Mid Cap Fund's portfolio is currently diversified across a host of cyclical, sensitive, and defensive sectors. Banking & Finance stocks form its top holding with a combined allocation of around 17.3%, closely followed by Auto Ancillaries and Engineering. Infotech, Consumer Durables, Pharma, Retail, Chemicals, Metals, Power, and Construction are among the other core sectors with an allocation in the range of 3%-8% in each. The top 10 sectors together account for around 74.4% of its assets.



Belonging to a fund house driven by strong investment systems and processes, Invesco India Mid Cap Fund stood strong during tough market conditions and managed to limit the downside risk for its investors. Moreover, it has also done well during market recoveries. The focus on fundamentally sound quality names in the mid-cap domain and astute stock picking has helped the fund to reward its investors with reasonable risk-adjusted returns.

With a small corpus size of around Rs 2,262 crore and exposure to highly liquid stocks, Invesco India Mid Cap Fund has the advantage of a quick liquidation of the portfolio in case of extreme conditions. The fund managers have done well to turnaround the fortune of the fund and achieve a spot among the list of above-average performers in the mid-cap fund category.

The aggressive investment mandate along with higher allocation to mid-caps and small caps makes Invesco India Mid Cap Fund suitable only for investors having a higher risk appetite and an investment horizon of at least 5 to 7 years.


Warm Regards,
Divya Grover
Research Analyst


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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.



About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

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  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Suresh Lulla;

  13. I V Subramaniam;

  14. Murali Ananthan Krishnan.

Disclosure with regard to ownership and material conflicts of interest
  1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

  3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

  4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

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Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Website: Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

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