Indian economy is exhibiting definite signs of recovery. The market, buoyed by the economic revival and reduction in risk aversion globally, has significantly moved up from its low in March 2009. We expect the current rally to sustain over a longer term. In these times, mid-caps tend to outperform large-caps. For instance, BSE Mid-cap index has outperformed the Sensex by a significant ~44% since March 2009.
We believe there are many mid-cap companies that offer high growth potential. However, participating individually in them could be difficult and risky, so we advise investing via a mutual fund. In the mid-cap space, we recommend investing in Sundaram BNP Paribas Select Midcap Fund (SSMF).
Investment rationale
- SSMF has noticeably outperformed its peers and the benchmark for most of its tenure. Even in the recent rally, the fund gained the most by rising 164% from its 52-week low, whereas its category average and benchmark appreciated by only 134% and 154% respectively.
- Despite being a mid-cap fund, SSMF managed its downside very well. In last two years, when the benchmark BSE Mid-cap declined by 12.6%, this fund contained its downside to 1.9%.
- The fund manager maintained an extensive and well-diversified portfolio of aggressive and defensive sector companies, with the lowest expense ratio.
- We recommend investment in SSMF for investors having high-risk-appetite based on the robust past performance and fund manager’s track record.
Analysis
With a medium to long-term perspective, investment in midcap space would appearto be positive. Investment in the mid-cap space should boost equity investors’ overallreturns. Hence,we recommend investing in SSMF from mid-cap category.