The Indian mutual fund industry has been witnessing a significant growth in recent years, with more and more investors turning towards this investment avenue. One particular segment that has caught the attention of investors is the mid-cap funds. These funds, which invest in companies with a market capitalization between ₹5,000 crore and ₹20,000 crore, have seen a remarkable increase in their assets under management (AUM) in the past few years. In fact, as per the latest data, the AUM of mid-cap funds has nearly doubled to ₹4.61 lakh crore since December 2022, showcasing the growing popularity and trust of investors in this category.
The rise in AUM of mid-cap funds can be attributed to various factors. Firstly, the mid-cap segment has been outperforming the large-cap segment in terms of returns, making it an attractive option for investors. In the last five years, the Nifty Midcap 100 index has delivered a return of around 17%, while the Nifty 50 index has given a return of around 12%. This outperformance has caught the attention of investors, who are now looking to diversify their portfolio by investing in mid-cap funds.
Secondly, the mid-cap segment is considered to be the sweet spot for long-term investors. These companies have the potential to grow at a faster pace compared to large-cap companies, but at the same time, they are relatively less risky than small-cap companies. This makes mid-cap funds an ideal choice for investors who are looking for a balance between risk and return.
Another factor that has contributed to the rise in AUM of mid-cap funds is the increasing awareness among investors. With the rise of digital platforms and the availability of information at the click of a button, investors are now more informed and are making well-informed investment decisions. They are realizing the potential of mid-cap funds and are willing to take a calculated risk for higher returns.
Moreover, the recent regulatory changes in the mutual fund industry have also played a significant role in the growth of mid-cap funds. The Securities and Exchange Board of India (SEBI) has mandated that mutual funds can now invest only in 10% of their AUM in unlisted securities. This has led to a shift in focus towards listed mid-cap companies, as they offer better liquidity and transparency compared to unlisted companies. This move has also instilled confidence in investors, who now have a better understanding of where their money is being invested.
The rise in AUM of mid-cap funds is not just limited to the metro cities, but it is also gaining traction in tier 2 and tier 3 cities. This is a positive sign as it shows that the mutual fund industry is reaching out to a wider audience and is not limited to a particular section of society. The increasing participation of retail investors from smaller cities is a testament to the growing trust and confidence in the mutual fund industry.
The growth of mid-cap funds is not just limited to equity funds, but it is also seen in other categories such as debt funds and hybrid funds. This shows that investors are not just looking for high returns, but they are also considering the risk associated with their investments. This balanced approach towards investing is a positive sign for the overall growth of the mutual fund industry.
In conclusion, the rise in AUM of mid-cap funds is a clear indication of the growing popularity and trust of investors in this category. The outperformance of mid-cap companies, increasing awareness among investors, regulatory changes, and the reach of mutual funds to smaller cities have all contributed to this growth. As the Indian economy continues to grow, the mid-cap segment is expected to witness further growth, making mid-cap funds a lucrative investment option for investors. It is a testament to the fact that with the right approach and a long-term investment horizon, mid-cap funds have the potential to deliver attractive returns and help investors achieve their financial goals.
