More multibaggers = Better mid-cap returns? Not quite

Summary: For mid-cap funds, finding multibaggers is no uphill task. However, does the number of such stocks in a mid-cap fund’s portfolio decide its returns? We assess the funds’ long-term performance to give our verdict.

For equity mutual funds, the quality of their stock holdings plays a crucial role in shaping returns. And if a fund has several multibaggers (stocks that compound investors’ wealth multiple times) they should enhance its performance, right?

Not really. Hunting for multibaggers isn’t a Himalayan task, particularly for mid-cap funds. However, has it meaningfully improved outcomes? This is what we have set out to explore in this story.

Multibaggers count only if they are sized right

To find out, we analysed mid-cap funds that held the most stocks delivering at least a threefold return between December 2019 and December 2025, equivalent to an annualised gain of 44 per cent or more. We then assessed how many of these multibaggers were backed with high conviction, defined as portfolio allocations exceeding 1 per cent.

At first glance, the numbers above look impressive. However, the count alone is misleading. For instance, while the ICICI Prudential Midcap Fund held 21 multibaggers, it backed only 12 of them at meaningful weights. In simple words, its high-conviction multibagger hit rate was just 57 per cent. In contrast, Franklin and Edelweiss backed over 92 per cent of their winners with allocations of more than 1 per cent. The difference is not in discovery. It is a commitment.

Yet even conviction alone does not guarantee impact. To find out which funds actually let their multibaggers drive wealth, we measured each stock’s contribution to the fund’s total portfolio value over six years.

When multibaggers did the heavy lifting

Though allocation matters for multibaggers, what’s more important is whether they have improved a mid-cap fund’s performance and by how much.

To understand this, we assumed a Rs 10,000 investment made on January 1, 2020, and valued it as of December 31, 2025. The data below shows what share of each fund’s final portfolio value came from multibagger stocks alone.

From the data above, we can gather that mid-cap funds of Edelweiss, Nippon, Kotak and HDFC derived nearly or more than 80 per cent of their portfolio value from multibaggers. However, for funds such as Mirae Asset Midcap and ICICI Prudential Midcap, the presence of multibagger stocks didn’t materially contribute to their performance.

What’s more, strong performers like Invesco India Mid Cap Fund, Motilal Oswal Midcap Fund and LIC MF Midcap Fund, which delivered strong returns over the same period, did not even make the list.

Thus, it is worth noting that high multibagger contribution is a portfolio style, not a performance requirement.

Counting multibaggers is easy. Letting them matter is hard.

Mid-cap funds, or any other equity fund for that matter, don’t outperform by simply identifying and holding a large number of multibaggers. They outperform when those stocks are backed by high conviction, allowed to compound over the long term and given enough weight to materially influence returns.

For investors, what matters more isn’t the quantity of multibagger stocks in a mid-cap fund’s portfolio, but its long-term performance, fund managers’ track record, expense ratio, NAV (net asset value) and their own risk tolerance and financial goals.

To know which mid-cap funds best suit your needs, subscribe to Value Research Fund Advisor, which helps you make that choice with data-backed recommendations aligned to your financial goals, whether you seek long-term growth or steady income. Stop guessing. Start investing with a plan. 

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