Only 6 Midcap Mutual Funds beat Nifty Midcap 150 in the last 5 years

A look at how midcap funds performed in comparison to this index in the last 1,2,3,4 and 5 years. Is it time to consider passive investing options in the midcap space?

Published: January 30, 2020 at 12:00 pm

Last Updated on January 30, 2020 at 12:00 pm

Only six midcap mutual funds (direct plan) managed to beat Nifty Midcap 150 TRI (dividends included) in the last five years (six becomes four if we consider regular plans). Let us take a look at how midcap funds performed in comparison to this index in the last 1,2,3,4 and 5 years.

Please note we do not recommend these funds.  This data is only for one particular window in time. To analyse performance consistently, the reader can consider using the Jan 2020 Equity Mutual Fund Performance Screener. The aim of this study is to point out that even in the large cap space beating the index is not as easy as it seems.

As on Jan 29, 2020, only the following six funds (out of a total of 22) managed to outperform Nifty MIdcap 150 TRI over the last five years (trailing). These funds also outperformed the index over 1, 2 and 3 years.  

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  1. Kotak Emerging Equity Fund
  2. Sahara Midcap Fund
  3. DSP Midcap Fund
  4. Axis Midcap Fund
  5. L&T Midcap Fund
  6. Invesco India Midcap Fund

The full list of funds and their five-year returns are shown below. The index returns are shown in blue and category average and median in red.

Scheme Name5 Years
Kotak Emerging Equity Fund12.46
Sahara Midcap Fund12.15
DSP Midcap Fund11.89
Axis Midcap Fund11.51
L&T Midcap Fund11.41
Invesco India Midcap Fund11.27
Nifty Midcap 150 – TRI10.04
Motilal Oswal Midcap 30 Fund10.00
Edelweiss Mid Cap Fund9.83
Tata Mid Cap Growth Fund9.74
Franklin India Prima Fund9.56
Taurus Discovery (Midcap) Fund9.55
Category Median9.55
HDFC Mid-Cap Opportunities Fund9.54
BNP Paribas Mid Cap Fund9.48
Category Average9.16
Nippon India Growth Fund9.04
Sundaram Mid Cap Fund8.65
SBI Magnum Midcap Fund7.93
Aditya Birla SL Midcap Fund7.68
ICICI Pru Midcap Fund7.68
UTI Mid Cap Fund7.30
Quant Mid Cap Fund6.87
PGIM India Midcap Opp Fund6.29
Baroda Mid-cap Fund1.77

Nifty Midcap 150 TRI returned – 3.29% over the last two years (trailing).  During this period 18 out of 23 funds managed to do better. Out of this 18, 10 of them managed a positive return.  Over the last year (trailing) 16 out of 24 funds managed to beat the index.

The poor performance of the category over five years in spite of this recent recovery is notable. Few funds may have changed nature after the SEBI categorization but even then the outperformers are relatively few. Finally over the last three years (trailing), only 10 out of 23 funds managed to get a return better than the Nifty Midcap 150 TRI index

Does this mean we can consider passive investing in the midcap space? We have three ETFs and one index fund – Motilal Oswal Nifty Midcap 150 Index Fund (Should you invest?) – in this space.

However, none of them has been seriously tested during a big market crash or liquidity crunch in midcap stocks. An actively managed midcap fund has the freedom to hold up to 20% of large cap stocks and these can effectively act as “liquid cash” in case of redemption pressure. In addition, active midcap funds have done well during the last two years (when the index fell by – 3%). Such downside protection would be missing in a midcap index or ETF. Thus I would recommend those eager to invest passively in midcap stocks to wait and watch a little bit longer.

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