Why this 5-star mid-cap fund's size has grown 7x in 10 years

Summary: In this article, we dig deeper by breaking down how often it has truly delivered strong returns, whether it actually beats its benchmark and how it performs when markets tumble and rise in relation to its benchmark. Plus, a peek at the five stocks that carry the most weight in its portfolio.

HDFC Mid Cap Fund has quietly become a giant. With nearly Rs 84,000 crore in net assets, it’s now by far the largest mid-cap fund in India, almost seven times bigger than it was a decade ago. And it isn’t just size. The fund also carries a five-star rating from Value Research.

The obvious question is, “Why have investors poured so much money into this one scheme?”

The short answer is simple: performance.

The return story

Over the past three, five and 10 years, the HDFC Mid Cap Fund has delivered annualised returns of 25.79 per cent (third-best in the category), 29.61 per cent (fifth-best) and 19 per cent (sixth-best), respectively.

But where it truly shines is for long-term SIP investors. Over ten years, its SIP return (XIRR) works out to 21.18 per cent. To put that in human terms: a monthly SIP of Rs 10,000 started 10 years ago would today be worth nearly Rs 36.7 lakh.

Numbers like these explain why assets have ballooned. But the story doesn’t get over here. Let’s go deeper than trailing returns and look at the historical performance of the fund.

Why rolling returns matter

Trailing returns — the usual 3-, 5- or 10-year snapshots — can be misleading because they depend entirely on the start and end dates. A fund might look brilliant in one window and average in another.

That’s why seasoned investors turn to rolling returns. Instead of a single snapshot, they capture performance across every possible period, showing how consistent a fund really is.

So, for HDFC Mid Cap, we checked five-year returns starting from every single day over the past five years, and here’s what we found:

• Only 5.6 per cent of the time did HDFC Mid Cap investors end up with single-digit returns (0–10).
• About 36.3 per cent of the time, five-year returns landed between 10 and 15.
• Nearly 19.8 per cent of the time, the fund delivered between 15 and 20.
• And most strikingly, more than 38.3 per cent of the time, investors walking away after five years saw annualised returns above 20.

That last figure is worth pausing on. It means that in over one-third of all five-year windows, patient investors were rewarded with exceptionally high returns.

Of course, it hasn’t been a one-way street. On a rolling-return basis, the fund has managed to beat its benchmark (the Nifty Midcap 150 TRI) only about 30 per cent of the time. But when you look at full calendar years, the fund has outperformed in seven out of the last 10 years.

Capturing the ups, cushioning the downs

Moreover, the fund doesn’t just ride the highs, it also limits the pain during the lows.

Take the upside capture ratio. At 114.1, it means that when the mid-cap index (BSE 150 Midcap TRI) goes up 10 per cent, the fund on average has gone up 11.4 per cent.

The fund’s downside capture ratio is 82.2, which means that when the index falls 10 per cent, the fund falls only about 8.2 per cent. It loses less than the market.

Even when compared with other mid-cap funds, HDFC Mid Cap has been a smoother ride. Its ups and downs (measured by standard deviation) were 13.85 per cent in the last three years, while the average mid-cap fund swung wider at 15.5 per cent. Simply put, standard deviation is just a measure of how much a fund’s returns move up and down. A lower number means the fund’s performance has been less jumpy, while a higher number means more wild swings.

Put together, this is the holy grail of active management: make more when the market rises, lose less than the benchmark when it falls.

Portfolio check

While the Nifty Midcap 150 trades at a P/E ratio of 32.7, the fund’s holdings are cheaper, at 26.3 times earnings, as of July 2025. That valuation cushion matters, especially now when many experts view the mid-cap space to be frothy.

Sector-wise, it is overweight in:

• Financials (24.1 per cent vs 20.4 per cent category average)
• Consumer Discretionary (14.6 per cent vs 12.5 per cent)
• Technology (13.1 per cent vs 11.2 per cent)

Its top holdings include names like Max Financial, Balkrishna Industries, Coforge, The Federal Bank and Ipca Labs.

Who should invest in HDFC Mid Cap?

Now, here’s the catch. A mid-cap fund is not for everyone.

If you’re new to equity investing, the volatility can test your resolve during market downturns. Plus, you need to stay put for at least seven to 10 years.

For such investors, SIPs are the way to go. They smooth out entry points, make the volatility bearable and reward patience with the power of compounding.

Should you add this five-star fund to your portfolio?

The fund’s record speaks for itself. But don’t just chase ratings or past returns. The real question is: does this fund fit into your portfolio, your goals and your risk appetite?

That’s exactly what Value Research Fund Advisor helps you figure out. Our analysts go beyond star ratings. We look at a fund’s risk-adjusted returns, the fund manager’s skill and whether it complements your existing holdings.

So before you rush to add the country’s largest mid-cap fund, make sure it’s the right fund for you.

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Also read: 2 mutual funds that grew investors' wealth 6x in just 10 yrs