Nifty 100 Midcap Index Today – Midcap 100 Live Sensex & Stock Values
Mid-size companies have more potential for growth than large companies due to their size. Due to this reason, some people prefer to invest in mid-cap funds rather than large-cap companies. While mid-caps have higher potential for growth, they also carry a higher risk than large-cap companies. This article will understand mid-cap funds, their features, benefits, & taxation.
What are midcap funds?
Before talking about mid-cap funds, let us first understand mid-cap companies. SEBI has defined mid-cap companies as 101st – 250th companies as per market capitalisation. A mid-cap fund is an open-ended fund that has to invest a minimum of 65% of its total assets in equity and equity-related instruments of mid-cap companies.
Mid-cap companies have the potential to be tomorrow’s large-cap companies. Mid-caps have the potential for higher growth compared to large-cap companies. At the same time, mid-cap companies carry higher risks than large-cap companies.
How to invest in mid-cap funds?
Based on the management style, mid-cap funds are of two types: active and passive/index mid-cap funds.
Active mid-cap funds
- Most active mid-cap funds have the Nifty Midcap 150 Index as the benchmark. An active mid-cap fund invests most of its money in the Nifty Midcap 150 Index stocks. However, the fund manager decides which company shares to buy, the number of shares, and when and at what price. The same applies to selling these shares also. As the fund manager takes most of the decisions by following an active management style, these funds are known as active mid-cap funds.
Nifty Midcap 150 Index funds
- The other way of investing in mid-cap stocks is through a Nifty Midcap 150 Index Fund. As per SEBI guidelines, a Nifty midcap index fund has to invest a minimum of 95% of its total assets in equity and equity-related instruments of the Nifty Midcap 150 Index. A Nifty Midcap 150 Index fund invests in all the Nifty Midcap 150 Index constituents as per their weightage. The fund replicates or tracks the performance of the Nifty Midcap 150 Index. These funds are also known as passive funds or index funds. Examples of mid-cap index funds include Aditya Birla Sun Life Nifty Midcap 150 Index Fund, Nippon India Nifty Midcap 150 Index Fund, etc.
Who should invest in mid-cap funds?
All equity funds carry a high-risk profile. However, the risk profile of a mid-cap fund is between that of a large-cap and a small-cap fund. A small-cap fund has the highest risk profile, followed by a mid-cap fund and finally a large-cap fund.
So, an investor looking to take more risk than large-cap stocks but lower than that of small-cap stocks can consider investing in a mid-cap fund. An investor looking to take a moderate risk and benefit from the growth of mid-cap companies can consider investing in a mid-cap fund.
Who should invest in an active mid-cap fund?
As an investor, if you are okay with the fund manager deciding which stock to buy, how much, when, and at what price to buy, you can invest in an active mid-cap fund. The expense ratio of an active fund is on the higher side. The fund manager's objective is to outperform the Nifty Midcap 150 Index. However, the actual returns may be higher or lower than the Nifty Midcap 150 Index.
Who should invest in a Nifty midcap index fund?
If you want to invest in all the 150 companies that are a part of the Nifty Midcap 150 Index in the same proportion as their weightage in the Nifty Midcap 150 Index, you can invest in a Nifty Midcap 150 Index Fund. The expense ratio of a passive fund is on the lower side. The fund manager’s objective is to replicate the performance of the Nifty Midcap 150 Index. However, the actual returns may be slightly lower than the benchmark index due to the expense ratio and tracking error.
Best mid-cap mutual funds
Let us look at the returns of some mid-cap funds.
|Scheme name||AUM (Rs. crores)||1-year||3-years||5-years|
|PGIM India Midcap Opportunities Fund||4,069||64.13%||40.37%||25.63%|
|Axis Midcap Fund||16,835||43.12%||29.42%||25.28%|
|Quant Mid Cap Fund||247||54.59%||31.98%||24.01%|
|Edelweiss Mid Cap Fund||1,864||49.08%||29.51%||22.11%|
|Invesco India Mid Cap Fund||2,194||43.83%||26.81%||22.01%|
Note: The returns are as of 17th Jan 2022. The returns are for direct plans with growth option. The one-year returns are absolute. The three and five-year returns are CAGR. The funds have been ranked based on five-year performance.
Taxation of mid-cap funds
Mid-cap funds are a sub-category under the broad category of equity funds. Hence, the taxation of mid-cap funds is similar to that of equity funds.
Short-term capital gain (STCG) tax: If you sell your mid-cap mutual fund units before 12 months, the capital gain will be classified as short-term capital gain (STCG). The STCG will be taxed at 15%.
- Long-term capital gain (LTCG) tax: If you sell your mid-cap fund units after 12 months, the capital gain will be classified as long-term capital gain (LTCG). The LTCG of up to Rs. 1 lakh in a financial year will be exempt. The incremental LTCG above Rs. 1 lakh in a financial year will be taxed at 10% without indexation benefit.
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