Posted on June 11, 2024 under Mutual Funds by Divyansh Shah

10 Best Midcap Mutual Funds in India to Invest in 2024

Investing in mutual funds is a smart way to grow your money over time. With so many options available, finding the right one can be overwhelming. That's where the best midcap mutual funds come into play. These funds invest in mid-sized companies that have the potential to grow significantly. In 2024, midcap mutual funds in India are expected to be especially rewarding due to their balanced approach to growth and risk. They offer a sweet spot for investors, providing a mix of stability and high returns, making them a great choice for long-term investors.

Key Takeaways

1. Midcap mutual funds offer significant growth potential.
2. They provide diversification benefits with moderate risk.
3. Ideal for investors with a long-term horizon.

Table of Content

What is Midcap Mutual Funds?

Midcap mutual funds invest in mid-sized companies that have a market capitalization ranging from Rs 5,000 crores to Rs 20,000 crores. These companies are typically in a growth phase, offering a blend of stability and potential for high returns. Midcap funds are positioned between large-cap funds, which invest in well-established companies, and small-cap funds, which target emerging firms with higher risk and reward profiles.

Investing in midcap mutual funds can be an excellent way to capitalize on the growth potential of mid-sized companies. These firms often have substantial room to expand and innovate, leading to higher returns for investors. Unlike large-cap funds, which offer more stability but lower growth prospects, midcap funds strike a balance between risk and reward. They are less volatile than small-cap funds, making them a more attractive option for moderate risk-takers.

10 Best Midcap Mutual Funds to Invest in 2024

As we enter 2024, let’s highlight the 10 Top Midcap Mutual Funds to invest in, considering 'fund performance' as a key criterion for selection. Each fund’s unique strategy and asset allocation promises to cater to different investor profiles and financial goals. The chart below is prepared as per the highest 5-year return.

10 Best Midcap Mutual Funds (2024)	5Yr Return
1. Quant Mid Cap Direct Growth	366.29%
2. Motilal Oswal Midcap Direct Growth	268.45%
3. Mahindra Manulife Midcap Direct Growth	253.92%
4. PGIM India Midcap Opps Fund Direct-Growth	248.46%
5. Edelweiss Mid Cap Direct Growth	242.26%
6. Nippon India Growth Direct Growth	233.78%
7. HDFC Mid-Cap Opportunities Direct Growth	221.89%
8. Kotak Emerging Equity Direct Growth	221.76%
9. SBI Magnum Midcap Direct Growth	218.59%
10. Invesco India Midcap Direct Growth	215.44%

^{Absolute Return taken on 10/06/24 , Source: Trendlyne}

Why to Invest in Midcap Mutual Funds?

For several reasons, investing in the best midcap mutual funds is a smart choice. First, midcap companies are in their growth phase, meaning they have significant potential to expand and increase their market share. This growth phase can translate into higher returns for investors compared to large-cap funds, which invest in more established companies with less room for rapid growth. By investing in midcap mutual funds, you can benefit from the success of companies on their way to becoming industry leaders.

Moreover, midcap mutual funds offer a balanced risk-reward profile. While they are riskier than large-cap funds, they are generally less volatile than small-cap funds. This makes them a good option for investors who are willing to take on some risk for the possibility of higher returns but do not want the extreme volatility that comes with small-cap funds. Overall, midcap mutual funds are a great way to diversify your investment portfolio and take advantage of the growth potential of mid-sized companies.

Advantages of Midcap Mutual Funds

High Growth Potential: Midcap mutual funds invest in rapidly expanding companies. These companies often have innovative products or services and are growing their market presence, which can lead to higher returns for investors.
Diversification: Investing in midcap mutual funds means spreading your money across various mid-sized companies. This diversification helps reduce the overall risk of your investment portfolio because it does not rely on the success of a single company.
Professional Management: Midcap mutual funds are managed by skilled professionals who carefully select companies with strong growth prospects. Their expertise can help identify promising investment opportunities and manage the associated risks.
Moderate Risk: While mid-cap funds are more volatile than large-cap funds, they are generally less risky than small-cap funds. This moderate risk level makes them an attractive option for investors seeking a balance between risk and reward.

Who Should Invest in Midcap Mutual Funds?

Investors with Higher Risk Tolerance: Midcap mutual funds are ideal for those comfortable taking on more risk for higher returns. If you can handle short-term market ups and downs, these funds might be a good fit for you.
Long-term Investors: These funds are best for people who plan to invest their money for several years. Midcap companies need time to grow and reach their full potential, so a long-term investment horizon can help you benefit from this growth.
Portfolio Diversifiers: If you already have investments in large-cap and small-cap funds, midcap mutual funds can add a good balance to your portfolio. They offer a middle ground between the stability of large-cap funds and the high risk and reward of small-cap funds.
Investors Seeking Growth Opportunities: Midcap mutual funds often invest in emerging companies with strong growth potential. If you want to invest in companies that could become the leaders of tomorrow, these funds provide a great opportunity.

Factors to Consider Before Investing in Midcap Mutual Funds

Before investing in midcap mutual funds, evaluating several factors to ensure they align with your investment goals and risk tolerance is important. Here are some key points to consider:

Past Performance: Look at the fund's historical returns over different time periods. While past performance doesn't guarantee future results, it can give you an idea of how the fund has performed in various market conditions.
Fund Manager Expertise: The experience and track record of the fund manager are crucial. A skilled manager can make a significant difference in the fund's performance by making informed investment decisions.
Expense Ratio: The expense ratio represents the annual fees the fund charges its investors. A lower expense ratio means more money stays invested, potentially leading to higher returns.
Volatility: Midcap funds can be more volatile than large-cap funds but less so than small-cap funds. Consider your comfort level with market fluctuations when choosing a midcap mutual fund.
Investment Horizon: Midcap mutual funds are generally better suited for long-term investments. Be prepared to stay invested for several years to benefit fully from mid-sized companies' growth potential.
Downside Capture Ratio: This ratio shows how well the fund performs in a falling market. A lower downside capture ratio indicates that the fund tends to lose less than the market during downturns, which can be reassuring for risk-averse investors.

Risks Involved in Midcap Mutual Funds

Investing in midcap mutual funds comes with certain risks that you should be aware of before committing your money. Here are some key risks to consider:

Market Volatility: Midcap funds can experience significant price swings due to market fluctuations. The value of your investment can go up or down rapidly, making them riskier than large-cap funds.
Limited Track Record: Mid-sized companies often have shorter histories than large-cap companies. This limited track record can make predicting their future performance and stability harder.
Managerial Dependency: The success of midcap mutual funds heavily relies on the skills and decisions of the fund manager. If the manager makes poor investment choices, it can negatively impact the fund's returns.
Economic Sensitivity: Midcap companies can be more sensitive to economic changes than larger companies. Economic downturns, interest rate changes, or sector-specific challenges can significantly affect their performance.
Liquidity Risk: Some midcap stocks may have lower trading volumes, making it harder to buy or sell shares without affecting the stock price. This can impact the fund’s ability to manage its portfolio efficiently.

Taxation on Midcap Mutual Funds

Understanding the tax rules for midcap mutual funds can help you plan your investments better. Here are the key tax aspects you need to know:

Short-term Capital Gains (STCG): If you sell your midcap mutual fund units within one year of buying them, any profit you make is considered a short-term capital gain (STCG). This gain is taxed at 15%, regardless of your income tax bracket.
Long-term Capital Gains (LTCG): If you hold onto your midcap mutual fund units for over one year before selling them, the profit is called a long-term capital gain (LTCG). Gains up to Rs 1 lakh in a financial year are tax-free. However, any amount over this is taxed at 10% without indexation benefits.

Tax Benefits Under Section 80C for ELSS Funds

Equity Linked Savings Schemes (ELSS) are a special type of mutual fund that offer tax benefits. By investing in ELSS, you can deduct up to Rs 1.5 lakh from your taxable income under Section 80C of the Income Tax Act. These funds come with a three-year lock-in period, which is shorter compared to other tax-saving options. ELSS funds mainly invest in stocks, including midcap stocks, giving you both tax savings and the potential for good returns. This makes them a popular choice for investors looking to save on taxes while also growing their money.

Dividend Distribution Tax (DDT) and Its Implications

Previously, dividends from mutual funds were taxed before reaching investors, known as Dividend Distribution Tax (DDT). Now, dividends are added to your total income and taxed according to your income tax slab. This means if you receive dividends from your midcap mutual funds, you will pay tax on them based on your overall income level.

Overview of Best Midcap Mutual Funds to Invest in 2024

Here is an overview of the 10 Top Midcap Mutual Funds and their Expense Ratio, NAV, and Returns.

1. Quant Mid Cap Direct Growth

Quant Mid Cap Fund Direct-Growth is one of the best midcap mutual funds introduced by Quant Mutual Fund. Investors were allowed to access this programme on April 15, 1996. Sanjeev Sharma is the current fund manager of the Quant Mid Cap Fund Direct-Growth fund.

NAV: Rs 264.48
Expense Ratio: 0.62%
AUM: Rs 6920.17 Cr
Minimum lump sum investment: Rs.1000

Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
73.78	144.29	366.29