L&T Midcap Fund Review: Impressive Turnaround in Performance!

Published: March 17, 2019 at 11:30 am

Last Updated on

This is a performance review of L&T Midcap fund. Launched in Aug 2004, it has grown to the 6th position in terms of AUM ( ~ 3,700 Crore). Off the cuff, it appears to be a volatile fund since it has fallen by -7% in the last year, but it has still managed to keep pace with BSE Midcap. Let us dig deeper and find out.

You can explore the previous fund reviews at the archive. Also, check out the Quantum Long Term Equity fund review at Youtube published yesterday (16-3-2019)

L&T Midcap Fund Review: Impressive Turnaround in Performance!

L&T Midcap Fund: Investment strategy: Prior to the SEBI categorization rules, it had a mandate to “invest in companies whose market capitalization falls between the highest and the lowest constituent of the Nifty Free Float Midcap 100 Index”. Perhaps ironically its mandate is now a lot broader!

As per SEBI rules, Mid Cap stocks are those ranked between 101 and 250 based on the full market capitalisation and a midcap fund only needs to be invested in 65% of such stocks. The benchmark remains as  Nifty Midcap 100 Index (new version from NSE). The AMC hopes to control portfolio risk by select stocks based on:

• Management quality, strategy and vision
• Business dynamics
• The financial strength of the company
• Free cash flow
• Returns on capital employed and returns on equity
• Credit Rating for the instrument in case of Debt instruments

The fund has seen several fund manager changes in the past. As you would see from the analysis below, the performance has picked up only after the appointment of S. N Lahiri.

L&T Midcap fund manager change history
Screenshot courtesy: Morningstar

L&T Midcap fund vs NIfty 100 Midcap TRI

The 3Y, 5Y and 7Y returns and risk (standard deviation) for L&T Midcap fund is compared with Nifty 100 Midcap TRI. If we sort NSE stocks by free-float market cap, the top 100 are called, large cap, the bottom 250 small cap and the middle 150 as mid cap.

Out of these 150, stocks the top 50 stocks from NSE Midcap 50. The Nifty 100 Midcap Index, formerly known as NIFTY Free float Midcap 100, contains all stocks from Midcap 50 index and the rest 50 are chosen from the 150 stocks based on average daily turnover. Please have a good look at the three graphs below and then scroll down to the observations.

Three-year rolling returns and risk

L&T MIdcap Fund vs Nifty 100 TRI Index: Three-year rolling returns and risk

Five-year rolling returns and risk

L&T MIdcap Fund vs Nifty 100 TRI Index: Five-year rolling returns and risk

Hate ads but would like to support the site? Subscribe to our ad-free newsletter and get beautifully formatted full articles delivered to your inbox!

Seven-year rolling returns and risk

L&T MIdcap Fund vs Nifty 100 TRI Index: Seven-year rolling returns and risk

Observations: Notice how the performance picks up mid-2013. Prior to the appointment of S. N. Lahiri, even the risk was compared to that of the index. For the last 5.5 years or so, the fund has outperformed the index in terms of return and risk.

L&T Midcap fund vs Peers

Let us now look at the five-year rolling return and risk performance of L & T Midcap with other popular peers like HDFC Mid Cap Opportunities (read review here), Franklin India Prima Fund (read review here), Kotak Emerging Equity, Axis Midcap and Sundaram Midcap (read review here).

Rolling Return (5Y)

L&T MIdcap vs peers 5 year rolling return

Rolling Risk (5Y)

L&T MIdcap vs peers 5 year rolling risk

Rolling Return (10Y)

L&T MIdcap vs peers 10 year rolling return

Observations: Overall that is pretty good. L & Midcap Fund is neither the worst nor the best and that is good enough.

Summary

Overall, I think L &T has turned around the fortunes of this fund well, but the fund manager has not yet been severely tested. Existing investors do not have anything to worry about as of now. New investors can certainly consider this fund, but all investors, as always must keep an eye not only on performance but also on the AUM inflow each month. Be on guard if there is a sudden surge in AUM.

Other mutual fund reviews

You can explore the previous fund reviews at the archive. Also, check out the Quantum Long Term Equity fund review at Youtube published yesterday (16-3-2019)

Do share if you found this useful
Hate ads but would like to support the site? Subscribe to our ad-free newsletter and get beautifully formatted full articles delivered to your inbox!

About the Author

Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com

About freefincal & its content policy

Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. We operate in a non-profit manner. All revenue is used only for expenses and for the future growth of the site. Follow us on Google News
Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)

Connect with us on social media

Our Publications


You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingThis book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
   

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new

This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when traveling, how traveling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)  

Free Apps for your Android Phone

Comment Policy

Your thoughts are the driving force behind our work. We welcome criticism and differing opinions.Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

2 Comments

  1. Hello sir for your diagrams the black line is not able to be seen in black background. Please use another color for the L&T MidCap.

Leave a Reply

Your email address will not be published. Required fields are marked *