ITI Mutual Fund Launches Mid Cap Fund NFO – Should you Invest?
ITI Mid Cap Fund NFO would open for subscription on 15th February, 2021. Mid Cap mutual funds invest in midcap stocks and are considered as high risk. Midcap category has been lagging behind its performance in the last couple few years. However, post covid-19 market crash, when the stock market recovery happened from Apr-2020, this segment started performing well. Should you invest in ITI Mid Cap Fund NFO? Currently midcap funds have delivered 16% to 19% annualized returns in the last 5 -10 years. Can we expect similar returns from such NFOs.
Also Read: Best Midcap mutual funds to invest in 2021
What are Mid Cap Mutual Funds?
As the name indicates, Midcap Mutual Funds invest in Midcap stocks. Mid Cap stocks are categorized as companies that are counted from 101th to 250th company in terms of market capitalization. Many midcap stocks have turned to be multi bagger stocks if invested for medium to long term. If you observe, Rakesh Jhunjhunwala has multiplied money with midcap stocks.
ITI Mid Cap Fund NFO Issue Details
This is an open-ended mutual fund scheme. Here the NFO issue details.
| ITI Mid Cap Fund NFO – Issue Details | |
|---|---|
| Scheme Opens | 15-Feb-21 |
| Scheme Closes | 01-Mar-21 |
| Scheme reopens for continous purchase/sale | 15-Mar-21 |
| Minimum Lumpsum | ₹ 5,000 |
| Minimum SIP | ₹ 1,000 for 6 months |
| NAV of the fund | ₹ 10 during NFO period |
| Entry Load | Nil |
| Exit Load | 1% if redeemed < 1 year |
| Risk | Very High Risk |
| Max expense Ratio (TER) | 2.25% |
| Benchmark | Nifty Mid Cap 100 TRI |
Download ITI Mid Cap Fund NFO KIM
Who can invest in this mutual fund scheme?
Any of the following can invest in this scheme.
1) Resident Individuals
2) Resident Indian Nationals, including partnership forms, companies, Banks, HUFs, Sole Proprietorship etc.,
3) NRI’s
4) Foreign Portfolio Investors
What is the investment objective of ITI Mid Cap Fund NFO?
The investment objective of the Scheme is to seek to generate long term capital appreciation by predominantly investing in equity and equity related securities of mid cap stocks.
However, there is no assurance or guarantee that the investment objective of the Scheme will be realized.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern is as follows:
| Type of instruments | Min % | Max % | Risk Profile |
|---|---|---|---|
| Equity and Equity related instruments of mid cap companies | 65% | 100% | High |
| Equity and Equity related instruments other than mid cap companies | 0% | 35% | High |
| Debt and money market instruments | 0% | 35% | Low to medium |
| Units issued by REITs & InvITs | 0% | 10% | Medium to High |
Why should you invest in such Midcap Funds?
Here are a few reasons to invest in such schemes.
1) Midcap mutual funds invest in Midcap stocks. There are several midcap stocks that would turn as multibagger stocks / largecap stocks in the medium to long term where investors can get benefitted.
2) Midcap is one of the category of mutual funds that gave superior returns between 16% to 19% in the medium to long term. If you want to take risk and expect high returns, midcap funds could be the best bet for you.
3) High risk investors can diversify their portfolio by investing some portion in midcap mutual funds.
Some risk factors you should consider before investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) Midcap funds invest in midcap stocks which are considered as HIGH RISK. Unless you are a high risk investor, you can should stay away from such schemes.
2) There could be under performance in the Midcap segment for various reasons, e.g. what we could see midcap segment under performance for 2017 to 2019. Investors should be willing to have patience in such case.
3) This fund invests up to 35% in debt instruments. This segment has turned to be high risk due to defaults from corporates.
4) This fund invests up to 10% in in REITS and InvITS which are high risk.
5) You can go through all risk factors indicated in the scheme related documents before investing.
How is the Performance of existing Mid Cap funds?
Here is the performance of current Midcap funds.
| Fund Name | 1 Year | 3 Year | 5 Year | 10 Year |
|---|---|---|---|---|
| Axis Midcap Fund | 26% | 18% | 19% | NA |
| Kotak Emerging Equity | 27% | 12% | 18% | 18% |
| DSP Midcap Fund | 24% | 11% | 18% | 17% |
| PGIM India Midcap Opportunities Fund | 53% | 16% | 17% | NA |
| Invesco India Mid Cap Fund | 28% | 13% | 17% | 18% |
| Edelweiss Mid Cap Fund | 32% | 9% | 17% | 19% |
| Nippon India Growth Fund | 25% | 10% | 17% | 14% |
| Taurus Discovery (Midcap) Fund | 24% | 9% | 17% | 16% |
| Tata Mid Cap Growth Fund | 25% | 11% | 16% | 17% |
| L&T Midcap Fund | 19% | 5% | 16% | 17% |
| HDFC Mid-Cap Opportunities Fund | 25% | 7% | 16% | 18% |
Also Read: 5 Midcap Mutual Funds which 1 year return of 50%
Should you invest in the ITI Mid Cap Fund NFO?
This mutual fund scheme invests in the midcap segment. This segment has generated high returns between 16% to 19% in the last 5 to 10 years. However, midcap funds are high risk. If you are a high risk investor and willing to invest for long term of 8-10 years, one can invest in such funds. If you do not want to test new funds, you can invest in some of the consistent performing midcap funds through SIP. One should avoid investing in lump sum in such schemes unless you are investing during the stock market crash. If you are moderate to low risk investor, stay away from such schemes.
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