Planning To Invest In The Best Multicap Funds In 2018? Think Again
Dec 20, 2017

Author: PersonalFN Content & Research Team


When buying a car, some prefer Sports Utility Vehicles (SUVs) that are usually more expensive, but the thrill of driving them is an owner’s delight. Others favour hatchbacks that are convenient to take the family around town.

Car manufacturers then introduced a new segment known as ‘Crossovers’. A crossover offers the features of a SUV with the dimensions and efficiency of a family vehicle. Such cars have been a big hit among those wanting the best of both worlds.

Similarly, in the mutual fund space too, there are large-cap funds that offer stability at one end. And at the other end, midcap and smallcap funds offer the excitement of supernormal returns, though being equally risky at the same time.

In between both the categories are multicap funds. Multicaps invest in a mix of both largecap and midcap stocks. Hence, multicap funds offer investors stability as well as a high-return potential.

Multi-caps funds are expected to maintain a stable allocation to largecap and midcap stocks. This category of funds is often confused with flexicap funds that vary their exposure to largecap and midcap stocks depending on the market conditions. A flexicap fund can work as a large cap fund, if the fund manager expects a better performance from largecaps. It may also serve as a mid & small cap fund if he (the fund manager) turns bullish on mid-sized companies.

In some cases, the fund house has not clearly defined the investment objectives of such equity-diversified funds.  Hence, you might find a multicap fund behaving like a flexicap fund and vice-versa.

The mutual fund regulator puts an end to the confusion by defining multicap funds. Multicap funds are defined as “An open ended equity scheme investing across largecap, midcap, smallcap stocks.” Hence, the fund manager is free to vary the asset allocation across market-caps. The regulator introduced another category known as ‘Large & Midcap Fund’. Here, the minimum investment to largecap and midcap stocks is 35% each.

Largecap stocks are the first 100 companies in terms of full market capitalisation. While midcap stocks are the next 150 companies in terms of marketcap.

Given these definitions, soon fund houses will be categorising their existing multicap and flexicap funds in to one of these categories. In certain cases, the fund may also have to alter the investment objective of the fund in order to meet the definition set by the regulator. As only one scheme per category is allowed, this may also result in several scheme mergers.

Thus, investors should keep this in mind when searching for the best multicap funds for 2018.

Let’s take a look at the top multicap funds in 2017.

Top 10 Multicap Funds of 2017

Scheme Name
1 Year (%)
Aditya Birla SL Pure Value
Principal Growth
MOSt Focused Multicap 35
Reliance Reg Savings-Equity
Aditya Birla SL Advantage
HDFC Capital Builder
BOI AXA Equity
DSPBR Equity
Escorts Growth
Templeton India Growth
Data as on December 19, 2017. Returns are absolute
(Source: ACE MF, PersonalFN Research)

*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.

Is now a good time to invest in multicap funds?

Valuations are stretched across market capitalisation. The trail P/E of the Sensex is above 24x while the P/E of the mid-cap index is in excess of 45x. The mid-cap valuations shot up from around 30x to 40x on deteriorating earnings. The small-cap index has soared to unimaginable valuations. From a P/E of about 80x a few months back, P/E is just short of the 90x mark.
Market Valuations Continue to Soar

Data as on December 11 2017
(Source:, PersonalFN Research)

Investors are investing heavily expecting an upswing in earnings. However, they may get disappointed. The overall economic growth may not sustain without pick up in investment activity (which is hinged on internal and external factors). Also, the slowdown in consumption (due to cash crunch, loss of jobs –especially in the unorganised sector, diminutive rise in salaries, slower employment growth and rural distress) when read with the investment growth number, highlights the negative output gap that exists in the Indian economy.

The Organisation for Economic Co-operation and Development (OECD) has trimmed India’s growth forecast to 6.7% (from June 2017 estimate of 7.3%) citing temporary impact of rollout of GST and demonetisation. Likewise, Fitch (an international rating agency) has pruned India’s growth estimates for this fiscal further to 6.7% from 6.9% and 7.4% earlier citing that rebound was weaker than expected. Similarly, the International Monetary Fund (IMF) has pared its growth projections for India to 6.7% from 7.2% for the currently fiscal year.

While the government will look to push the reform agenda strongly, a lot of work is needed to stimulate a pick-up in investment activity. Credit growth has been tepid. According to the RBI data, on a year-on-year (y-o-y) basis the non-food bank credit increased by 6.6% in October 2017; which was marginally lower than 6.7% in October 2016; but, noticeably lower than 10.8% in September 2016.

Given this backdrop, it will be tough for equities to repeat the past year’s performance. However, for the long term, equities still remain the best route to create wealth. Hence, when investing in equity funds, adopt the systematic approach to investing.

How to pick the best multicap funds for 2018?

In order to identify the best mutual funds, one would rely heavily on past performance. Though past performance is an unreliable indicator of future returns, a scheme that has done well consistently in the past, is expected to do well in the future too. However, this may not hold true going ahead.

With the regulator issuing guidelines for the categorisation and rationalisation of mutual funds, how mutual funds adhere to this needs to be closely watched. The category choice is limited and only one scheme is allowed per category.

You need to keep an eye on how fund houses categorise their schemes. A significant change in the investment objective may render the past performance of the fund irrelevant. If the investment objective of the scheme remains the same, a change in categorisation will not matter.

You need to pick the scheme based on its risk-return parameters vis-a-vis other peers and the quality of fund management.  Not all mutual funds have the capability to perform consistently. You need to analyse the returns of multicap funds across multiple periods and market cycles. Shortlist the funds that have consistently outraced the market and their peers. The scheme you select should match your risk profile and should be suitable to meet your investment goals.

Those who are unsure about which mutual fund schemes to invest in may try PersonalFN’s unbiased mutual fund research services. Along with quantitative parameters such as performance, PersonalFN also considers qualitative parameters such as portfolio characteristics while analysing mutual fund schemes.

One such service of PersonalFN is FundSelect. This service helps you identify the top-performing funds across varying market caps and investment styles——be it largecap, midcap, multicap, value-based or balanced funds——highlighting the underperforming or average performing ones too.

FundSelect will assist you in discovering the "best of the best" equity as well as debt funds in the market. It will help you build a solid mutual fund portfolio through disciplined investing. So, you have an opportunity to benefit from market beating returns generated by quality mutual funds. 

So don't hesitate...give FundSelect a try Now.


Best Midcap Funds For 2018. Look Before You Leap!


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 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, it subsidiaries and its Directors. 

and condition on which its offer research report. For the terms and condition for research report click here.

Details of associates

  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. HelpYourNGO Private Limited;
  8. HelpYourNGO Foundation;
  9. Natural Streets for Performing Arts Foundation;
  10. Primary Real Estate Advisors Private Limited;
  11. Rahul Goel;
  12. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest

  1. Neither QIS, it’s Associates, Research Analyst or his/her relative have any financial interest in the subject Company , except QIS receives fees for providing research to Quantum Equity Fund of Fund (QEFoF) which is Fund of Fund scheme managed by QMF.
  2. 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.
  3. 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

Disclosure with regard to receipt of Compensation

  1. Neither QIS nor it's Associates have any compensation from the subject Company in the past twelve months.
  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company in the past twelve months.
  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company in the past twelve months.
  4. Neither QIS nor it’s Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months except from Axis Bank Limited under a service agreement.
  5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

General disclosure

  1. The Research Analyst has not served as an officer, director or employee of the subject Company.
  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021. Email: Website: Tel.: 022 61361200 Fax.: 022 61361222

SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

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