Choosing the Best Midcap Index Fund for Long-Term Investment in 2024

Introduction

Choosing the best Mutual Fund for our investment portfolio from a long-term perspective takes time and effort. At mutualfundfocus.com, we simplify this process and bring you the best after performing the in-depth analysis. 

This blog will discuss the best midcap index Fund for long-term investment in 2024 for mutual fund investors.

Why Index Funds Matter?

As index funds are the best way to invest in mutual funds in a very cost-efficient and transparent way to achieve a market-linked return,

For this analysis, we will do a deep dive by analysing Forty midcap funds in the index and active mutual fund categories. Of these, 11 are midcap index funds, and 29 Are active Mutual Funds in the midcap category. 

And before the deep dive into this topic, the result might surprise you both in terms of returns in the long term and consistent performance throughout the years.

Analysis of Midcap Index Funds vs. Active Mutual Funds

This blog on finding the best midcap index fund will give you a deep insight into the performance of index funds compared to active mutual funds. It also helps investors save time and make informed decisions while choosing the best midcap index fund for their investment portfolio.

Returns Parameters Analysis

Training Year Returns Analysis

So, the first thing we will analyse is the training year Returns Versus the calendar returns of 11 midcap index funds in 2023.

Based on the above data, we can see that out of these 11 midcap index funds, nine mutual funds gave fabulous returns of more than 40% in 2023.

Key Take Aways:

Here, the top three performers are the

1. Edelweiss Nifty Midcap150 Momentum 50 Index Fund
2. Axis Nifty Midcap 50 Index Fund
3. Tata Nifty Midcap 150 Momentum 50 Index Fund

Which has performed so well in this bull run in 2023 and provided a handsome return of more than 50% in just one year.

Two Funds that did not perform so well in 2023 in the Midcap index mutual fund category are,

1. DSP Nifty Midcap 150 Quality 50 Index Fund
2. UTI Nifty Midcap 150 Quality 50 Index Fund

Comparison with Active Midcap Funds trailing returns

In the second step, we are going to compare these 11 index Mutual Funds With the 29 active midcap funds, and believe me, the results are going to blow your mind.

Here, we have compared the one-year trailing returns of all these Mutual Funds in 2023. 

And the key takeaway from this Training year Returns analysis are:

1. The top 5 are three active midcap mutual funds and two index midcap funds. 
2. The top 10 see seven active midcap mutual funds and three index midcap Mutual Funds.
3. It is imperative to know that out of these 11 index midcap Mutual Funds, which we have compared in this analysis, nine have made their place in the top 25 funds. 
4. And 18 active midcap mutual funds fail to outperform the index fund performance. 

Calendar Year Returns comparison

Next, we will compare the calendar year returns for all these midcap funds for 2023. 

The key take away in this Calendar year returns analysis are:

1. In the top 5, we can see that midcap index fund had made their place by beating almost all the Active Midcap Mutual Funds. And here is just too active midcap mutual fund making their place in the top 5.
2. And the top 10 results are even mind-boggling. Seven index funds are making their place in the top 10, and only three active midcap funds are on this list.
3. The same is the case with the top 15 funds in this list, where almost 9 Midcap index funds had made their place in the top 15, and there are only six active midcap funds in this list.

The most crucial point to note here is that, in the case of one-year trailing returns and the calendar Returns 2023,  we can see that “Edelweiss Nifty Midcap150 Momentum 50 Index Fund” is the Undisputed winner of the Midcap index fund category. 

But just one year’s return does not justify the Consistency in the returns performance of these Mutual Funds in the index Midcap mutual fund category.

Annualised Returns comparison

So, in the next step, we will analyse the performance of the nifty midcap 150 Momentum 50 index versus the Nifty midcap 150 index.

Here, we have analysed the past 17 years’ calendar Returns of the index and their outperformance. 

The critical takeaways from these two index Annualised Returns comparisons are:

1. The Nifty Midcap 150 Momentum 50 index has outperformed 12 times out of 17 years, Whereas the Nifty Midcap 150 index has outperformed only five times.
2. The difference in the outperformance is also higher for the Nifty midcap 150 Momentum 50 index than the broad market index that is nifty midcap 150 index.

And this data reveals the consistency in the performance of this Nifty midcap 150 Momentum 50 index compared to the normal Nifty midcap 150 index.

Compounded Returns Analysis

This analysis will analyse the compounded return, the cagr of These midcap Indices for the past 15 years. Also going to look at the outperformance: 

Key takeaways from the compounded returns comparison of this midcap indices are:

1. The nifty midcap 150 broad midcap index has outperformed only in the first year in terms of compounded Returns.
2. The Nifty midcap 150 moments of 50 index has outperformed almost all the years compared to the Nifty midcap 150 broad indexes. 
3. Nifty midcap 150 Momentum 50 index has outperformed by More than three per cent in almost all the years In CAGR. 
4. The average compounded returns in the past 15 years for the Nifty midcap 150 Momentum 50 index was 17.83%, Whereas, for the Nifty midcap 150 index, it was 13.95%.

The compounder return analysis shows that the Nifty midcap 150 Momentum 50 index performs better than the standard broad index in the long term.

Risk Parameters Analysis

Volatility Assessment

After doing all these returns analyses, we are going to analyse the risk parameters for this midcap index for the past 15 years: 

The key is a ways from the volatility data of these midcap indices:

1. Over the past ten years, the Nifty Midcaps 150 index was less volatile than the Nifty 150 Momentum 50 index.
2. But in the long run, if we look at these indexes’ past 15 years of volatility, we can see that the Nifty midcap 150 Momentum 50 was a lesser bowler tile than the Nifty midcap 150.

So, the inference from this volatility analysis is that the Nifty midcap 150 Momentum 50 index is a high-risk Investment compared to the standard Nifty midcap 150  index.

But over the long term, the volatility decreases even for the Nifty midcap 150 Momentum 50 index.

Portfolio Analysis

Sector Allocation Examination

Next in this analysis, we are going to analyse the Sector allocation of these midcap indices:

Source NSE: Feb 2024.

Key takeaways from the sector analysis of these  indices:

1. Sector allocation is more concentrated in the nifty midcap 150 Momentum 50 index than the Nifty midcap 150 index
2.  However, the Nifty midcap 150 index is more diversified in sector allocation. It has an allocation in other sectors, which the Nifty Medical 150 Momentum 50 index fund doesn’t have.
3. Also, the allocation in the top five sectors is on the highest side in the nifty midcap 150 Momentum 50 index, then the Nifty midcaps 150 standard  index
4.  sector-specific risk is again on the higher side in the Nifty midcap 150 Momentum 50 index Compared to Nifty midcap 150 index

Hence, from this analysis, the nifty midcap 150 Momentum 50 index portfolio is more concentrated with just 50 stocks and less diversified than the standard Nifty midcap 150 index with 150 stocks.

The stock-specific and sector-specific risks are on the highest side In the nifty midcap 150 Momentum 50 index than the standard Nifty midcap 150 index.

Long-Term Performance Evaluation

Performance Graph Analysis

Finally, we are going to analyse the past 19 years’ performance graph of these midcap indices: 

Key take away from the performance analysis are:

1. In the short term, that is, in Less than three years, The performance of these indices Is almost similar, with no significant outperformance.
2. But in the long term, that is, for more than seven years, the Nifty midcap 150 Momentum 50 index started to perform this standard Nifty midcap out 150 index.
3. And then, for more than 15 years, there has been a remarkable outperformance in the nifty midcap 150 Momentum 50 index, which we can see in the graph I need to keep improving yearly.

With this analysis, we can say that If a mutual fund investor is planning for a very, very long term Of more than 10 to 15 years and can take higher risk, then Nifty midcap 150 Momentum 50 index fund could be a great choice instead of standard Nifty midcap 150 index fund. 

Final Results

Coming to the results of this entire analysis, the top five index funds for mutual fund investors to invest For a very long term  are:

1. Edelweiss Nifty Midcap150 Momentum 50 Index Fund
2. Axis Nifty Midcap 50 Index Fund
3. Tata Nifty Midcap 150 Momentum 50 Index Fund
4. Motilal Oswal Nifty Midcap 150 Index Fund
5. Aditya Birla Sun Life Nifty Midcap 150 Index Fund

Conclusion

In conclusion, I want to say that after the in-depth analysis of returns, risk and portfolio, we can see that index funds could be a better alternative both in terms of Returns and following expenses for a mutual fund investor who wants to invest in the mutual funds to achieve market link returns the active Midcap mutual funds.

 Even in the midcap index fund, the special index fund, especially the Nifty midcap 150 Momentum 50 index-related funds, is a better Mutual Fund than the other index funds in the same category if an investor has a higher risk capitate.

The standard Nifty 150 index fund could be a better choice for investors who are conservative in risk appetite. 

We hope you found this guide on mutual funds helpful.

If you have any mutual fund-related queries, feel free to comment below—we’re here to help! S.K. Singh, a registered professional with the Association of Mutual Funds in India (AMFI), will answer your queries and holds the ARN-251149.

Invest wisely!

FAQs – Best Midcap Index Fund for Long-Term Investment

Disclaimer:

The information provided in this article is solely the author/advertisers’ opinion and not investment advice – it is provided for educational purposes only. Using this, you agree that the information does not constitute any investment or financial instructions by Ace Equity Research/Mutual Fund Focus and the team. Anyone wishing to invest should seek their own independent financial or professional advice. Conduct your research with registered financial advisors before making any investment decisions. Ace Equity Research/Mutual Fund Focus and the team are not accountable for the investment views provided in the article.

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