Equity: Mid Cap

What is it?

Mid-cap equity funds invest in mid-cap stocks. The SEBI guidelines require mid-cap funds to invest 65% of total funds in mid-cap companies. According to the SEBI, companies in the 101st to 250th position in terms of market capitalization are mid-cap companies.

Objective

The objective of the mid-cap fund is to generate maximum returns by investing in mid-cap stocks.

Suitability and opinion

The fund manager has less freedom in the stock selection as at least 65% of the pooled funds are invested in mid-cap stocks. The stock universe for these funds is small. These stocks also contain higher risks and are suitable for aggressive investors. These funds have high volatility and can seriously underperform during a market downturn. Even then exposure should not be more than 10% of the portfolio. We believe that flexicap is a better category compared to mid-cap funds.