New to Midcaps? Tata's Passive fund offers low-cost, diversified exposure

By tracking the Nifty Midcap 150 index through passive investment, investors avoid stock-specific risks and benefit from a disciplined and cost-effective investment strategy.

Tata Asset Management on Tuesday launched a new passive fund that gives investors a low-cost way to ride the midcap growth wave. The Tata Nifty Midcap 150 Index Fund, open from June 2 to June 16, 2025, tracks a diversified portfolio of mid-sized companies that are rapidly gaining market share across sectors.

 

What is it?

This is a passive index fund that aims to mirror the performance of the Nifty Midcap 150 Index, which includes 150 mid-sized companies across 20 sectors. These are businesses that are not yet giants like large caps but have shown consistent growth and potential.

 

Key dates:

 

NFO (New Fund Offer) period: June 2 to June 16, 2025

 

Minimum investment: ₹5,000 (and in multiples of ₹1 thereafter)

 

Exit load: 0.25% if redeemed within 15 days

 

Why Midcaps Matter to You

Midcap companies often lie at the heart of India’s economic momentum — they’re agile, growth-oriented, and often industry leaders in the making. Historically, midcaps have outperformed both large caps and small caps:

 

1-year rolling return: Midcap index delivered 21.89%, vs 16.37% by Nifty 50

 

3-year rolling return: Midcaps returned 15.8%, vs 12.38% by large cap

 

(Source: NSE, ICRA-MFI, Apr 2005–Apr 2025)

 

What you are investing in:

This open-ended index fund mirrors the Nifty Midcap 150 Total Return Index (TRI), offering exposure to 150 mid-sized companies ranked 101st to 250th by market cap in the Nifty 500 universe.

 

Fund Managers: Kapil Menon & Rakesh Prajapati (combined 40+ years of experience)

 

Why choose this fund?

Diversification: The fund offers exposure to 74 industries, including those not represented in large-cap indices — like chemicals, realty, capital goods, and more.

 

Growth Potential: Over the last five years, 17 midcap companies graduated to the large-cap category, showing the potential for wealth creation.

 

Lower Costs: Being passively managed, it avoids the higher fees of actively managed funds.

 

Risk-Spreading: Instead of betting on one stock, your money is spread across 150 companies. Plus, it avoids stock-specific risks.

 

Who should invest?

• Long-term investors looking to benefit from India’s evolving economic landscape
• Investors who prefer low-cost, rule-based investing
• Those seeking diversification beyond blue-chip stocks
• SIP (Systematic Investment Plan) investors aiming for compounded returns over 5–10 years

 

Point to note: Midcap investments come with higher short-term volatility. Stay invested long enough to ride out the ups and downs.

 

“Midcaps represent India’s growth frontier. Through the Tata Nifty Midcap 150 Index Fund, investors can get access to potential growth sectors and companies that are integral to India’s next phase of economic expansion,” said Anand Vardarajan, Chief Business Officer, Tata Asset Management. “The fund is suitable for long-term investors seeking a blend of growth and diversification, backed by discipline of passive investing.”

 

The Nifty Midcap 150 index comprises companies across 20 sectors and 74 basic industries.

 

"Notably, 39 industries present in the midcap space but absent in the large cap space, account for over 40% of the total weight of the index, highlighting the unique diversification benefit that the segment offers. Nifty 100 is considered as a universe for large caps and Nifty Midcap 150 is considered as universe for mid-caps). Over the past five years, 17 companies from the midcap segment have transitioned into large caps, illustrating the segment’s capacity to aim for wealth creation," the company said in a release.

 

Why Midcaps Make Sense in 2025

While large caps offer stability, midcaps provide growth. These are companies typically valued between ₹33,000 crore and ₹1 lakh crore—big enough to be established, but small enough to grow rapidly.

 

Key insights from the fund presentation:

 

Midcaps have historically outpaced GDP growth, with their market cap-to-GDP ratio doubling in the last 10 years.

 

They are less sensitive to foreign investor outflows compared to large caps, as promoter holding is higher (~55%).

 

In the last 5 years, 17 midcap companies became large caps, showcasing the segment's transition power.

 

Sectoral and Industry Edge

The index gives significant exposure to sectors underrepresented in large caps: 

 

 39 industries—like fintech, data platforms, EV components, agrochemicals, and quick-service restaurants—are present in midcaps but absent in large caps, giving investors a differentiated portfolio. 

Performance & Risk

Midcaps have delivered better long-term SIP returns compared to both large and small caps: