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Summary: These five mid-cap funds don’t just chase returns—they pick businesses that grow steadily and play it smart. No fads, no noise. Just quality growth, done right. Curious which ones made the cut? Let’s find out…
At Value Research, we’ve long believed that high growth and high quality are the twin engines of long-term wealth creation. And mutual funds that focus on both—without chasing fads or trying to time the market—tend to deliver sustainable returns over time.
When we say high growth, we don’t just mean flashy revenue and profit spikes. We mean companies that steadily expand year after year, with a clear runway for future growth. We track this through long-term growth in sales and profits.
On the other hand, quality is all about strength and resilience. These are businesses that use capital efficiently, avoid excessive debt, generate consistent cash flows, and stay steady even in tough markets.
In short, high-growth, high-quality companies are the kind you'd want to hold for the long haul—and many smart fund managers agree. Take Motilal Oswal AMC, for instance. As their CIO Niket Shah puts it, they invest in “high-quality companies with high growth and longevity at reasonable prices”.
Given high-growth, high-quality companies have immense currency in the investment world, let’s identify the mid-cap and small-cap funds that put a lot of emphasis in such companies.
Funds that hold high growth, high quality stocks
Based on Value Research’s framework (as of June 30, 2025), only mid-cap funds could make the cut. None of the small-cap funds matched the high Growth and Quality scores achieved by their mid-cap peers.
Incidentally, these five mid-cap funds not only excel on fundamentals, but have also delivered SIP returns in excess of 20 per cent in the long run.
| Fund Name | Quality score (average 6 months) | Growth score (average 6 months) | 5Y SIP returns (%) | 7Y SIP returns (%) |
|---|---|---|---|---|
| Motilal Oswal Midcap Fund | 6.7 | 7.4 | 32.0 | 29.9 |
| Edelweiss Mid Cap Fund | 6.7 | 7.2 | 28.1 | 27.8 |
| SBI Midcap Fund | 6.5 | 7.6 | 21.6 | 23.2 |
| Mahindra Manulife Mid Cap Fund | 6.3 | 7.2 | 26.4 | 26.1 |
| PGIM India Mid Cap Fund | 6.4 | 7.3 | 20.0 | 24.1 |
| 7-year SIP returns, Quality and Growth scores are weighted equally to derive the best growth and quality funds.Growth and quality score as of June 30, 2025. SIP returns as of June 21, 2025.Only funds with more than seven-year history were considered. | ||||
What are the common traits in their portfolios?
When we dig deeper into these funds, a few common patterns stand out:
- High ROCE: Most companies in these portfolios generate 15–20 per cent return on capital—suggesting smart capital use.
- Low debt: These funds consciously avoid overleveraged companies, keeping risk in check.
- Consistent cash flows: These companies generate real profits, not just paper profits.
- Niche leaders: Think precision engineering, diagnostics, specialty chemicals—fast-growing spaces with limited competition.
Essentially, these funds aren’t throwing darts. They’re selectively built for quality and long-term potential, rather than chasing market momentum. As R Srinivasan, CIO (Equity) at SBI AMC, puts it: “We prefer businesses with clean accounts, decent return ratios and the ability to grow profitably over the long term. Short-term volatility doesn’t drive our allocation.”
Can you build a long-term portfolio using these funds?
Yes, but with some guardrails.
Mid- and small-cap funds—even the best ones—can be volatile in the short run. That’s why they work best as satellite holdings within a broader, diversified portfolio.
So, you should:
- Allocate only 20–30 per cent of your portfolio to such high growth, high quality mid-cap funds.
- Stay invested for at least 5–7 years to truly benefit from compounding.
- Pair with a core flexi-cap or index fund to balance risk and style.
What can investors learn from this strategy?
For investors, the key takeaway is this: it’s not enough to look at past performance. You need to look at the engine that drives those returns. Funds that focus on high-growth and high-quality stocks offer two critical advantages: they compound effectively in bull markets and stay resilient during corrections. This makes them well-suited for long-term SIP investors who want smoother, more predictable journeys.
Want to start an SIP of Rs 5,000+ in ‘high growth’ and ‘high quality’ mutual funds?
Explore Value Research Fund Advisor. We can help you discover funds built on strong business fundamentals—high growth, high quality and long-term potential.
Also read: 3 five-star flexi-cap funds in July. Do you own any?
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