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It's common wisdom that mid-caps outperform large-cap stocks during market rallies. Stock markets ended 2012 with a 25 per cent gain on the Sensex. Investors in SBI Magnum Emerging Businesses, a mid- and small-cap fund, gained 56 per cent which pales the returns posted by the Sensex and the 38 per cent gains posted by the BSE mid-cap index. If large-caps are the bread and butter of fund portfolios, mid-cap stocks are like jam. Mid-caps constitute about 30 per cent of the consolidated corpus of equity mutual funds and produce high returns. People are willing to take risks beyond the safety and visibility of the large-caps when investing in mid-caps. The converse happens when the market crashes. The main attraction of investing in mid-caps comes because they are future winners. The next Bharti Airtel or Infosys, the next multi-bagger to join the big league.
To read in detail about the stocks that drove five funds to post fabulous returns last year...
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