2023 has been a lukewarm year for our recommended mid-cap funds. But should their underperformance worry you? Read this story to get an answer. Here, we provide you a brief on our recommended mid-cap funds, along with the reasons behind their underperformance. Axis Midcap Fund The last three years have hit this fund's performance like a thunderbolt, with 2023 being the worst. While it beat an average peer and benchmark in the first half of the year, the fund underperformed significantly in the second half. Much of the fund's underperformance can be attributed to its growth style of investing. However, its tendency to be heavily invested in large caps also contributed to the relative underperformance, as large caps didn't fly as much as the other segments in the 2023 rally. Major underperformers were ICICI Bank, HDFC Bank and Avenue Supermarts. It is important to note that though these large caps underperformed, they are high-quality stocks. Additionally, the fund was deeply invested in consumption-theme-driven stocks, which didn't do well and pulled down its performance. Further, we also see stocks that had a great 2023, but the fund had a limited exposure to them. However, most of those stocks are now touching their all-time highs. At the AMC level, relative winds of changes have started to flow. We can see the fund making some amends, such as reducing exposure to consumer discretionary stocks and adding new stocks. What is heartening is the staunch focus on quality being maintained through thick and thin. Notably, the fund's current bunch of top stocks comprise the fastest-growing stocks that are making rapid strides in their business. What to watch out for Owing to its quality orientation, the fund is slightly tilted towards large caps. But owing to the rally in mid and small caps, some of the fund's tenets might work to its advantage in 20
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