Mid-cap funds are hot with investors. What’s driving the rush and should you invest now? Here’s what fund managers say — SkimNews
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- Nifty Midcap 150 trades at ~26x one-year forward earnings versus its historical average of ~24.8x, leaving investors paying a modest premium to long-term norms.
- Mirae Asset's Ankit Jain said the mid-cap category's share of net mutual fund flows rose from ~14% in FY23 to ~20% year-to-date, describing it as a more structural allocation trend.
- The Nifty Midcap 150 has delivered ~17% earnings CAGR over the past nine years and a 16.3% return CAGR over 10 years, Jain noted.
- The Wealth Company's Chinmay Sathe attributed sustained flows to strong domestic liquidity, improving investor awareness and the view that mid-caps offer greater growth potential than large-caps.
- Both fund managers cautioned that elevated valuations leave less room for earnings disappointments, with Sathe flagging that mid-caps can face liquidity constraints and sharper drawdowns during market stress.
- Jain said his team is finding opportunities in financials, insurance, pharmaceuticals, healthcare, export-oriented chemicals and manufacturing, cement, metals, and select consumer discretionary and logistics names, while marking capital goods as relatively expensive and underweight.
Why it matters: Indian mid-cap funds have absorbed a rising share of category inflows — now ~20% of net flows versus 14% in FY23 — even as the Nifty Midcap 150 trades at roughly a 5% premium to its historical average forward P/E. With valuations stretched, fund managers stress that future returns hinge almost entirely on whether individual companies deliver the ~17% earnings growth the segment has shown, not on multiple expansion.
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