Midcap funds AUM zooms past large-caps on sustained inflow
The assets under management (AUM) of mid-cap funds have surpassed the large-cap funds by a record 60 basis points, according to the data from the Association of Mutual Funds in India (AMFI). Currently, midcap funds constitute 12.9% of the total equity AUM compared with the 12.3% for their large-cap counterparts. With this, the mid-cap funds have become the third-largest fund category after sectoral and flexi-cap funds.
Historically, the AUM share of midcap funds has lagged the large-cap funds by about 550 basis points. In 2020, large-cap funds held a peak share of 20% in the equity funds AUM. Over the past year, their share has decreased by 228 basis points, while that of the mid-cap funds has increased by 30 basis points.
In the past year, equity AUM of the midcap funds rose by 64% to ₹3.8 lakh crore. It was significantly higher than the 36% growth in the large-cap AUM at ₹3.6 lakh crore. The growth can be attributed to fresh inflows as well as market appreciation. The midcap funds reported an inflow of ₹24,438 crore over the past year compared with ₹7,287 crore for the large-cap funds.
Additionally, the Nifty 150 Midcap index gained 55% over the 12 months to July 2024 compared with a 27.8% gain by the Nifty 50. On a risk-adjusted return basis, the midcap index has a Sharpe ratio of 2.58 compared with 1.55 for the Nifty 50. A higher Sharpe ratio implies presence of higher returns but not without higher risk.
Given the recent appreciation, valuations in the midcap segment look richer with a lower dividend yield.
