Mid cap funds are those mutual funds, which invest in small / medium sized companies. A company's size is determined by its market capitalization. Each mutual fund has its own way to determine small and medium sized companies. Generally, companies with a market capitalization of up to Rs 500 crore are classified as small. Those companies that have a market capitalization between Rs 500 crore and Rs 1,000 crore are classified as medium sized. Big investors like mutual funds and Foreign Institutional Investors are increasingly investing in mid caps nowadays because the price of large caps has increased significantly. Small / midsized companies tend to be under researched thus they present an opportunity to invest in a company that is yet to be identified by the market. Such companies offer higher growth potential going forward and therefore an opportunity to benefit from higher than average valuations. Mid cap companies are looked upon as wealth creators and have the potential to join the league of large cap companies.
But mid cap funds are very volatile and tend to fall like a pack of cards in bad times. So, caution should be exercised while investing in mid cap mutual funds. Mid cap funds are a good option in case the investor wants to add some diversity to his portfolio.
Top Mid Cap Funds in India:
* Sundaram BNP Paribas Select Midcap
* Franklin India Prima Fund
* HDFC Capital Builder
* Kotak Indian Mid Cap Fund
* HSBC Midcap Equity Fund