5 Best Mid Cap Mutual Funds to Invest in 2023 - Top Performing Mid Cap Mutual Funds in India

Mid Cap Mutual Funds offer you the opportunity to create significant long-term wealth. However, not all Mid Cap Mutual Funds are worthy of your investment. It is vital to select only those mutual funds that focus on picking quality stocks in the mid-cap segment. In this article, we bring to you PersonalFN's list of 5 Best Mid Cap Mutual Funds to invest in 2023 that have solid growth potential.

 

What are Mid Cap Mutual Funds?

The Securities and Exchange Board of India (SEBI) defines Mid Cap Mutual Fund as an 'open-ended equity scheme that invests a minimum of 65% of its total assets in equity and equity-related instruments of mid-cap companies'. Now, mid-cap companies are typically defined as companies ranking from 101st to 250th in terms of full market capitalisation. Generally, these companies have a market cap of more than Rs 5,000 but less than Rs 20,000 crore. The fund manager has the flexibility to invest the balance 35% in either large-cap stocks, small-cap stocks, debt instruments, or simply maintain it as cash reserves.

Examples of Mid Cap Mutual Funds in India

AUM data as of November 30, 2022
(Source: ACE MF)
 

What are the advantages of investing in Mid Cap Mutual Funds?

Mid Cap Mutual Funds have the potential to deliver superior returns because mid-sized companies are usually in their growth phase. Historical data suggests that Mid Cap Mutual Funds have the ability to outperform Large Cap Mutual Funds over the long term.

Notably, mid-cap companies have better access to capital and various resources when compared to small-caps, but fewer opportunities as compared to large-caps. Their management team is also stronger than that of small-caps and they adapt to new trends with better ease. They hold the potential to become the large-caps of tomorrow. In addition, you also get the opportunity to get exposure to certain niche stocks/sectors that may have high future potential.

Table 1
 

You can invest in Mid Cap Mutual Funds via the Systematic Investment Plan (SIP) to reap the benefit of rupee-cost averaging and compounding of wealth.

[Must Read:  5 Best Equity Mutual Funds for SIP in 2023]

Top stock holdings of Mid Cap Mutual Funds

Data as of November 30, 2022
(Source: ACE MF)
 

What are the risks involved in Mid Cap Mutual Funds?

Mid Cap Mutual Funds invest in emerging companies, and therefore, the risk involved is higher compared to Large Cap Mutual Funds but lower compared to Small Cap Mutual Funds.

Since Mid-cap companies have better growth opportunities, Mid Cap Mutual Funds tend to outperform their pure Large-cap and even their Large & Mid-cap peers by a significant margin during bull phases.

However, Mid Cap Funds are not as resilient during bear phases and may plunge lower than Large Cap Funds. Keep in mind that mid-cap companies have a limited scale of operation compared to their large-cap peers, lower customer outreach, and limited access to various resources. These factors make them vulnerable to high risk, especially during gloomy economic conditions.

This positions midcap funds as a high risk - high return investment avenue. On the risk-return spectrum, Mid Cap Mutual Funds are just below Small Cap Mutual Funds and Thematic/Sectoral Funds.

 

Who should invest in Mid Cap Mutual Funds?

If you have the appetite for high risk and are looking to create an inflation-beating and wealth-generating avenue with a long-term perspective, consider investing a portion of your portfolio in Mid Cap Mutual Funds. It is advisable to have a long-term investment horizon of at least 5-7 years when investing in Mid Cap Mutual Funds.

 

How much to invest in Mid Cap Mutual Funds?

Aggressive investors who can tolerate short-term market volatility for high future gains can consider allocating around 25%-30% of their equity mutual fund portfolio in Mid Cap Mutual Funds. The balance can be allocated in Large Cap Funds, Value Funds, Flexi Cap Funds, etc.

On the other hand, investors with moderate risk appetite can consider allocating 15%-25% in Mid Cap Mutual Funds. Conservative investors and investors who have an investment horizon of less than 5 years should ideally avoid investing in Mid Cap Mutual Funds.

 

How are Mid Cap Mutual Funds taxed?

Mid cap mutual funds are equity-oriented mutual funds and hence they follow equity taxation. The holding period for Mid cap mutual funds from a tax perspective is 12 months. So, if you sell your Mid Cap Fund units before 12 months, you are liable to pay short-term capital gains (STCG) tax of flat 15%.

On the other hand, if you sell your Mid Cap Fund units after completing one year, you pay a long-term capital gains tax of 10% without indexation, but only if your gains exceed Rs 1 Lakh in a financial year. If your long-term gains are below Rs 1 Lakh and you redeem after completing one year, then you do not have to pay any tax on these gains.

 
5 Best Mid Cap Mutual Funds to Invest in 2023 - Top Performing Mid Cap Mutual Funds in India
Image source: www.freepik.com - photo created by Freepik
 

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Which are the best Mid Cap Mutual Funds to invest in 2023?

With a universe of 28 midcap mutual funds, identifying the best Mid Cap Fund becomes crucial because unlike Large Cap Funds, which more or less invest in the same top 100 companies, albeit in varying allocations, investing in midcap funds is a tricky business. This is because Mid Cap Mutual Funds invest in relatively lesser-known companies that are striving to establish their brand value in the lives of Indian consumers. Also, unlike Large Cap Mutual Funds, where creating alpha is difficult since the investible universe is limited, when it comes to Mid Cap Mutual Funds, the fund manager's investment style and the strategy they follow can truly make a difference.

This is why, PersonalFN has shortlisted five best Mid Cap Mutual Funds to invest in 2023 after stringently evaluating each of the 28 midcap mutual funds on numerous qualitative and quantitative parameters.

Let us now take a look at the five best Mid Cap Mutual Funds to invest in 2023.

List of Best Mid Cap Mutual Funds to Invest in 2023

Scheme Name Absolute (%) CAGR (%)
1 Year 2 Years 3 Years 5 Years 7 Years
Quant Mid Cap Fund 18.36 33.64 39.26 20.88 18.59
PGIM India Midcap Opp Fund -1.12 26.45 36.53 17.52 17.92
SBI Magnum Midcap Fund 0.59 23.04 27.55 11.24 14.32
Mirae Asset Midcap Fund 3.66 24.00 26.57 -- --
Kotak Emerging Equity Fund 4.81 23.58 25.23 13.69 18.09
Past performance is not an indicator for future returns
Data as of January 06, 2023. Direct plan - Growth option considered
(Source: ACE MF)
 

Best Mid Cap Mutual Fund to invest in 2023 #1: Quant Midcap Fund

Launched in February 2001, Quant Midcap Fund is an actively managed small-sized scheme in the Mid-cap Fund category and follows aggressive investment strategies. Despite being small in size, Quant Midcap Fund has registered extraordinary performance in recent years and handsomely rewarded its investors. Quant Midcap Fund is now a top-performing Mid Cap Fund with superior returns across time frames. More importantly, Quant Midcap Fund stands out in the category in terms of risk-adjusted returns.

Fund Snapshot - Quant Midcap Fund

Past performance is not an indicator of future returns
Portfolio data as of November 30, 2022
Returns and NAV data as of January 06, 2023. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Quant Midcap Fund constantly looks for opportunities across stocks and sectors which has resulted in significant alpha for its investors. The fund is also quick in its approach to shift allocation between market caps depending on the market conditions, though it maintains a mid-cap biased portfolio and has recorded a higher churn rate of over 200 to 300%. Quant Midcap Fund has proved its ability to limit downside risk during depressed market conditions even though it has underperformed during bull phases in the past. This highlights the fund's ability to reward investors with superior gains over the long run.

Best Mid Cap Mutual Fund to Invest in 2023 #2: Kotak Emerging Equity Fund

Launched in March 2007, Kotak Emerging Equity Fund is a midcap-biased fund that seeks to identify the hidden growth potential of mid-sized companies. Kotak Emerging Equity Fund stood strong in the 2018-19 mid-cap crash as well as the market crash of 2020, even as many of its peers struggled to keep pace with the market returns, thus turning out to be one of the top performers in the category. Even in the recent bull phase, Kotak Emerging Equity Fund stood among the top performers in the category though it trailed the benchmark index.

Fund Snapshot - Kotak Emerging Equity Fund

Past performance is not an indicator of future returns
Portfolio data as of November 30, 2022
Returns and NAV data as of January 06, 2023. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Kotak Emerging Equity Fund holds a superior track record of generating market-beating returns across most time periods. Kotak Emerging Equity Fund carries an impressive track record under the supervision of Mr Pankaj Tibrewal, who is known for his expertise in the mid and small-cap space. The fund's focus on identifying high-conviction quality stocks in the mid-cap space and holding it with a long-term view has worked in its favour. Moreover, the fund has delivered in terms of risk-adjusted returns.

Click here to read our detailed analysis on Kotak Emerging Equities Fund.

Best Mid Cap Mutual Fund to invest in 2023 #3: Mirae Asset Midcap Fund

Incepted in July 2019, Mirae Asset Midcap Fund is one of the latest entrants in the Mid Cap Fund category. Despite having a short track record of little over three years, Mirae Asset Midcap Fund has grabbed investors' attention by showcasing superior performance. The fund has stood strong against its popular peers and has managed to outperform the category average as well as the benchmark by a noticeable margin across time periods. More importantly, Mirae Asset Midcap Fund has achieved this feat at a reasonable risk, thus rewarding investors with superior risk-adjusted returns.

Fund Snapshot - Mirae Asset Midcap Fund

Past performance is not an indicator of future returns
Portfolio data as of November 30, 2022
Returns and NAV data as of January 06, 2023. Regular Plan - Growth Option considered
(Source: ACE MF)
 

Mirae Asset Midcap Fund aims to build a diversified portfolio of companies having robust business models and have the potential to become large-caps of tomorrow. The fund manager does not compromise on the risk aspects to generate higher returns but maintains a diversified portfolio of quality stocks available at reasonable valuations, and holds them with a long-term view. Backed by a process-driven fund house and with an experienced fund manager at the helm, Mirae Asset Midcap Fund carries a positive outlook.

Best Mid Cap Mutual Fund to invest in 2023 #4: PGIM India Midcap Opportunities Fund

PGIM India Midcap Opportunities Fund is a growth-oriented mid-cap biased fund that aims to offer greater growth potential as compared to large caps but at a lower volatility and risk as compared to small caps. Launched in December 2013, the fund remained among the underperformers in its first 5 years. However, with a focus on high-quality stocks, it recorded a major breakthrough run in recent years wherein it has generated remarkable alpha over the benchmark and outpaced many of its peers.

Fund Snapshot - PGIM India Midcap Opportunities Fund

Past performance is not an indicator of future returns
Portfolio data as of November 30, 2022
Returns and NAV data as of January 06, 2023. Regular Plan - Growth Option considered
(Source: ACE MF)
 

PGIM India Midcap Opportunities Fund's performance is driven by prudent investment strategies and backed by strong systems and processes followed at the fund house. The fund is benchmark agnostic; the investments in stocks shortlisted using various parameters are typically made at the conviction of the fund manager, irrespective of their weightage in the index. PGIM India Midcap Opportunities Fund follows an active investment strategy and has a penchant to churn a major portion of its portfolio. However, it has shown a lot of patience with many of its quality stocks and sectorial bets, which have paid off its investors in due course.

Click here to read our detailed analysis on PGIM India Midcap Opportunities Fund.

Best Mid Cap Mutual Fund to invest in 2023 #5: SBI Magnum Midcap Fund

Launched in March 2005, SBI Magnum Midcap Fund aims to invest in a well-diversified basket of equity stocks of mid-cap companies. During its journey spanning over 18 years, the fund has been through lots of ups and downs. Despite this, SBI Magnum Midcap Fund has generated returns at a CAGR of over 16% since its inception. SBI Magnum Midcap Fund managed to limit the downside during the 2020 market crash to stand strong among its peers. Moreover, the fund also stood among the top performers in the category during the ensuing bull phase, thereby witnessing a complete turnaround.

Fund Snapshot - SBI Magnum Midcap Fund

Past performance is not an indicator of future returns
Portfolio data as of November 30, 2022
Returns and NAV data as of January 06, 2023. Regular Plan - Growth Option considered
(Source: ACE MF)
 

The fund stands out for its ability to stem losses during the bearish phase, wherein it has managed to outpace the benchmark as well as many of its peers. However, SBI Magnum Midcap Fund is not a great bull market performer and may underperform the benchmark and many of its peers. Despite facing bouts of underperformance, SBI Magnum Midcap Fund has managed to perform well over complete market cycles and reward investors for their patience.

Click here to read our detailed analysis on SBI Magnum Midcap Fund.

This completes our list of the five best Mid Cap Mutual Funds to invest in 2023. The only thing left to do now is to invest in these best mid cap funds and reap the benefits of investing in market leaders of tomorrow.

If you wish to have super compressive and detailed research reports on the best Mid Cap Mutual Funds for 2023 and other diversified equity mutual funds to invest in, subscribe to PersonalFN's premium research service, FundSelect.

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M - Market Cycle Performance

A - Asset Management Style

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T - Performance Track Record

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Disclaimer:

The schemes mentioned above are selected on the basis of PersonalFN's SMART Score, which considers various quantitative and qualitative parameters to arrive at fundamentally sound and reliable mutual fund schemes. These schemes may or may not be suitable for you. Hence, it is necessary that you understand your risk appetite and suitability well in case you consider investing in any of these funds. If unsure, do consult your SEBI registered investment advisor.  

This does not constitute investment advice. Returns mentioned herein are in no way a guarantee or promise of future returns. Mutual Fund Investments are subject to market risks, read all scheme-related documents carefully before investing.

 

DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.

Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.