Last Updated on August 9, 2021
In this report, we evaluate how actively managed midcap mutual funds have fared against the Nifty Next 50 Total Returns Index. We identify four midcap mutual funds have outperformed the Nifty Next 50 total returns index consistently.
In the Handpicked List of Mutual Funds Oct-Dec 2020 (PlumbLine) edition, we pointed out that we will be reevaluating midcap mutual funds vs Nifty Next 50 index. Nifty Next 50 has a risk and reward almost identical to that of the Nifty Midcap 150 Index. As we just saw in the Nippon India Nifty Smallcap 250 Index Fund Review. Therefore it is natural such a comparison is made.
Remember that although SEBI defines Nifty Next 50 stocks as part of the large cap universe, it is illiquid (high impact cost) and therefore quite volatile as explained before Warning! Even “large cap” stocks are not liquid enough! Can you handle this?
We shall consider rolling returns. That is, we shall compare every possible 1,2,3,4 and 5 year return periods possible from 1st Jan 2013 (from the inception of direct plans) to Sep 29th 2020. We shall only consider funds that have enough history to generate 1000 or more 1,2 and 3-year rolling return data points.
This is the full list of 22 midcap funds considered for the study. Among these, Edelweiss Mid Cap Fund, IDBI Midcap Fund and Mahindra Unnati Emerging Business Yojana were removed as the no of rolling return one-year data points were less than thousand (young funds with short history). DHFL Pramerica Midcap Opportunities Fund was also not considered as its 3-year history resulted in less than a thousand data points. These funds are indicated in red below.
| DSP Midcap Fund – Direct Plan – Growth |
| Invesco India Midcap Fund – Direct Plan – Growth Option |
| L&T Mid Cap Fund-Direct Plan-Growth |
| Kotak Emerging Equity Scheme – Growth – Direct |
| Axis Midcap Fund – Direct Plan – Growth |
| Franklin India Prima Fund – Direct – Growth |
| Taurus Discovery (Midcap) Fund-Direct Plan-Growth Option |
| Tata Mid Cap Growth Fund – Direct Plan Growth |
| HDFC Mid Cap Opportunities Fund -Direct Plan – Growth Option |
| Motilal Oswal Midcap 30 Fund (MOF30)-Direct Plan-Growth Option |
| BNP Paribas Mid Cap Fund – Direct Plan – Growth Option |
| Sundaram Mid Cap Fund- Direct Plan – Growth Option |
| Aditya Birla Sun Life Midcap Fund – Growth – Direct Plan |
| UTI Mid Cap Fund-Growth Option- Direct |
| SBI Magnum MIDCAP FUND – DIRECT PLAN – GROWTH |
| Nippon India Growth Fund – Direct Plan Growth Plan – Growth Option |
| Baroda Mid-cap Fund- Plan B (Direct) – Growth Option |
| Quant Mid Cap Fund-Growth Option-Direct Plan |
| DHFL Pramerica Midcap Opportunities Fund – Direct Plan – Growth Option |
| Edelweiss Mid Cap Fund – Direct Plan – Growth Option |
| IDBI Midcap Fund Growth Direct |
| Mahindra Unnati Emerging Business Yojana – Direct Plan – Growth |
Five years: 12/19 funds have outperformed Nifty Next 50 (NN50)with a consistency of 70% or more. For example, DSP Midcap Fund got a better return than NN50 over five years 676 out of 676 times or 100%. Let us call this performance consistency. HDFC Mid Cap Opportunities Fund beat NN50 495 out of 677 times equivalent to a performance consistency of 73%
Four years: Only 6/17 funds managed 70% or more performance consistency!
Three years: Only 4/17 funds managed 70% or more performance consistency!
These are the four funds that qualified as above over 5 and 4 and 3 years.
| L&T Mid Cap Fund-Direct Plan-Growth |
| Kotak Emerging Equity Scheme – Growth – Direct |
| DSP Midcap Fund – Direct Plan – Growth |
| Invesco India Midcap Fund – Direct Plan – Growth Option |
What do these results mean? Please do not rush to invest in these funds! These results only reiterate what we have been saying for a while: Those who want midcap (or small cap) exposure need not look beyond Nifty Next 50 passive funds. See: Combine Nifty and Nifty Next 50 funds to create large, mid cap index portfolios and What is the best way to invest in Nifty Next 50 Index? and ICICI Nifty Next 50 Index Fund vs Nippon India ETF Junior BeEs
Investors are better off with a Nifty Next 50 index fund than a Nifty Midcap 150 index fund or active midcap funds since it is impossible to predict which active fund would outdo NN50 in future.
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