Fund managers bet on mid caps for better returns

The rise in the mid-cap index for the week to Wednesday helped mid-cap equity funds beat large-cap funds.

Large-cap funds suffered due to fall in large-cap stocks.

Fund managers feel mid-cap stocks look attractive at current valuations and there are pockets of investment opportunities.

For the week to Wednesday, most mid-cap schemes featured among the top-performing diversified equity schemes.

During the period under review, the CNX Midcap Index rose 1.56 per cent, while the Sensex and the Nifty fell by nearly 0.66 per cent.

On the returns chart, all top-five positions are notched up by mid-cap schemes.

Magnum Midcap Fund was the best performer over the week with 3.92 per cent return followed by Magnum Global and UTI Mid Cap Fund with 3.56 per cent and 3.66 per cent returns, respectively.

Sanjay Sinha, equity head of SBI Mutual, said there is a substantial valuation difference between the mid-cap and large-cap segment.

"In the recent past, even though the overall mid-cap segment has not performed well, individual stocks like those in engineering and media delivered better returns," he said.

Franklin Templeton Mutual, in its report, said, "The last few years saw many of the quality mid and small companies take advantage of the emerging opportunities thrown up by the robust growth in the domestic economy, as well as increasing exports due to the global outsourcing trends."

Franklin India Prima Fund recorded 2.01 per cent returns.

Franklin Mutual also said, "Many companies in this space have re-engineered their businesses, improving processes and efficiency. We believe well-managed companies in this space have the potential to deliver superior returns over the longer term, albeit with higher volatility."

Some fund managers opine investors should allocate around 30 per cent of their savings in mid-cap funds as they have chances to outperform large-cap for the next six months.