Union Budget 2019: Mid-cap funds bear high-risk factors, offer high returns; small caps can be volatile

A mid-cap fund is a type of investment fund which focuses its investments on companies with a capitalisation in the middle range of stocks in the investable market.

FP Research June 25, 2019 16:49:00 IST
Union Budget 2019: Mid-cap funds bear high-risk factors, offer high returns; small caps can be volatile
  • Mid-cap funds bear high-risk factors and thus offer high returns in case of positive movements of the indexes

  • Nearly 95% of all India listed companies are small-cap companies

  • In general, companies with market capitalisation up to Rs 500 crore are termed as small

Mutual funds diversify investments between mid and small-cap companies and are termed as mid and small cap funds.

A mid-cap fund is a type of investment fund which focuses its investments on companies with a capitalisation in the middle range of stocks in the investable market.

The opportunity for investment in mid-cap funds is high due to the low identification factor in the market. Another important feature of these mid-cap funds is that they tend to grow in size as more investors get involved. The net effect is that a huge amount of money is invested against a few stocks.

Union Budget 2019 Midcap funds bear highrisk factors offer high returns small caps can be volatile

Bombay Stock Exchange. Reuters

A small-cap fund is a type of equity mutual fund which invests a majority of its assets in the stocks of small-cap companies (companies which rank 251st and more in terms of market capitalisation). Nearly 95 percent of all India listed companies are small cap companies.

Small-cap funds can be volatile because they invest in companies that are less stable than large-cap companies.

In general, companies with market capitalisation up to Rs 500 crore are termed as small and companies with a market capitalisation over Rs  500 crore, but below Rs 1,000 crore are defined as medium-sized firms by the mutual fund industry. Mid-cap funds bear high-risk factors and thus offer high returns in case of positive movements of the indexes.

Follow full coverage of Union Budget 2019-20 here

Updated Date:

also read

'Absolute baseless': Finance minister Nirmala Sitharaman rubbishes reports of coal shortage in India
India

'Absolute baseless': Finance minister Nirmala Sitharaman rubbishes reports of coal shortage in India

“There are not going to be any deficiencies which may lead to any shortfall of supply. So that takes care of India's power situation. We are now a power surplus country," added Sitharaman.

US India Business Council meets Nirmala Sitharaman; shows interest in ramping up investment
World

US India Business Council meets Nirmala Sitharaman; shows interest in ramping up investment

USIBC and CII hosted an interactive session in Washington on Wednesday

Sebi tweaks trading norms for mutual funds on RFQ platform
India

Sebi tweaks trading norms for mutual funds on RFQ platform

Inter Scheme Transfer trades are excluded from the revised framework, Sebi said in a circular. The new norms will come into effect from 1 December, 2021