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Mid-cap Magic

Mid-cap funds were the winners in 2003. Here is a look at the portfolio of these four funds and a brief summary of how they performed in one of the best years for equity investors.

Once, it appeared that mid-cap funds were just a passing fad. But the strong showing in 2002 by Franklin Prima and other mid-cap oriented funds such as Reliance Vision seemed to be a flash in the pan. Come 2003 and again mid-cap funds have topped the performance charts. Whether it is the colossal 177.13 per cent generated by Franklin India Prima, or the equally amazing 157.73 per cent by Sundaram Select Midcap, these funds deserve a closer look.

Franklin India Prima
Prima is the oldest pure mid-cap fund in the country and with Rs 633 crore of assets under management is also the largest. The fund leads the diversified category in 2003 with a return of 177.13 per cent. Its five-year returns of 45.43 per cent annualised also place it at the top of the heap. The fund has the distinction of being in the first quartile of its category for four of the last five calendar years. It was only in 2000 that the fund took a beating landing in the last quartile.Prima is heavily engaged in cyclical stocks. There is effectively no exposure to IT, FMCG or pharma. The absence of these sectors makes the fund concentrated in its chosen sectors. Its top three sectors account for 55 per cent of its portfolio. The fund is however, diversified at the stock level with most stocks accounting for less than 5 per cent of the portfolio each.

Sundaram Select Midcap
Launched in 2002 this scheme has proved that Sundaram Mutual is capable of running more focussed schemes, which can ride the momentum as well as the next fund. The fund was stationed in the first quartile in 2003, its only full calendar year. Like Prima, it too has no IT exposure. The fund seems to be following Sundaram's overall policy of diversification as no single stock accounts for more than 4 per cent of the portfolio. As and when stocks exceed this limit they are quickly sold to maintain this diversification.

Birla Midcap
The last of the new mid-cap launches this scheme has been somewhat slower than the others. Its 113 per cent in 2003 places it in the second quartile of the diversified category. The fund has been slower than the others have because it has held an average of 15 per cent in IT in 2003. For most part of the year IT shares were laggards. The fund also has some 15 per cent in FMCG companies and is the most diversified among the actively managed mid-cap funds.

Nifty Junior ETF
Nifty Junior ETF tracks the Nifty Junior, which is an index of mid-cap shares. As with other index funds, the portfolio of shares, here is known and there are changes only when the underlying index changes.

These funds' portfolios have the more established companies in the mid-cap universe As the economy grows mid-cap companies will grow to become large-caps. Mid-cap funds thus enable investors to participate in the growth of these companies. So when tempted to invest in the smaller names of the India Inc head for mid-cap funds. And while doing so do not forget that higher returns also mean higher risks.