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Nilanjan Dey

`Range of stocks available at compelling prices'

Kolkata March 19 Mid-cap funds are trying to claw their way back after a spell of relative inactivity, spurred by the view that the market is consolidating and valuations are again turning attractive.

Some of them are aiming to utilise the large cash positions they have been sitting on for some time.

Fund houses, which suggest that a range of mid-cap stocks is currently available at compelling prices, say that a number of these are worth investing in at the moment.

As a result, fund managers are preparing for fresh allocations in the mid-cap space.

The segment has been in the news lately, mainly due to the volatility that has been evident here.

Quite a few stocks, representing a good number of sectors, have been involved, sources said.

The segment, they added, will at any rate remain important for a section of the investor community, thanks to the arrival of more funds.

The reference is to the funds that have been lately floated by players like DSP Merrill Lynch MF (whose small- and mid-cap fund is among the most recent in this genre). They have clearly added to the assets being managed by those that already existed.

Mr Sandip Sabharwal, CIO (Equity), JM MF, said the mid-caps space holds strong promise at this juncture.

"The market has taken note of the consolidation that has happened in this segment. There is a strong case for these stocks and investors need to actively explore opportunities."

JM's own small- and mid-cap product will close for subscription in early April.

Some quarters advocate fresh investments in mid-caps, provided certain basic precautions are taken.

Over-exposure to the segment can be risky and investors need to do their allocation carefully.

Mr Mugunthan Siva, CIO of OptiMix, warned that mid-caps are often not quite as researched as large-cap stocks.

"Despite this, these are not necessarily constrained by poor liquidity. Good stock-picking remains the key here."

OptiMix recently introduced a multi-manager equity fund.

Armed with cash

A number of mid-cap funds are holding substantial cash, as revealed by a look at their last-available portfolios.

A compilation by distribution outfit Plexus Management shows that these include SBI Magnum Mid-cap (25 per cent), Sundaram Select Mid-cap (26 per cent), ING Vysya Mid-cap (13 per cent) and Tata Mid-cap (10 per cent).

A number of other funds - these do not carry the mid-cap label - with considerable exposure to mid-cap stocks also had marked cash positions.

These include Canemerging Equities (10 per cent), HSBC Advantage India (10 per cent) and Magnum Global (30 per cent).

Closed-ended funds with sizeable exposure to mid-caps may soon become a bigger sub-set, said distributors, referring to the likes of UTI Wealth Builder, which aims at long-term capital appreciation and has a clutch of mid-caps in its portfolio. It had 17 per cent in cash at the end of last month.

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