What Makes Mid-Cap Funds A Better Choice?

Given the historical tendency for mid-cap funds to outperform large-cap funds in the long run, it's plausible that mid-cap funds can continue their performance from this point onwards. This makes investing in mid-cap funds a good choice. The article highlights how mid-cap funds have performed and the associated risks

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Since the beginning of this year, equity indices have been on a remarkable ascent, particularly the broader equity market indices. For instance, the Nifty Mid-Cap 150 index has surged by 23 per cent year-to-date, a remarkable contrast to the single-digit returns offered by large-cap indices like Nifty and Sensex during the same period. Following a pendulum-like pattern, mid-cap stocks are emerging strong in FY24 after exhibiting subdued returns in the previous financial year of 2022-23. This resurgence is already evident in the past few months.

Historical trends reveal a recurrent pattern where mid-cap indices bounce back with superior returns after periods of subdued performance. For instance, in 2013, the Nifty Mid-Cap 150 yielded negative returns, only to generate over 50 per cent returns in the subsequent year, 2014. A similar trend was observed in 2015 and 2016, where mid-cap returns were modest, but then experienced a surge of over 50 per cent average returns in 2017. Therefore, the year 2023 is poised to be another favourable year for mid-cap investments.