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Shanthi Venkataraman

INVESTORS can stay with Birla Midcap. While the launch of several mid-cap funds is in the offing, currently there are few funds that are strictly focussed on mid-caps. Franklin Prima is the only fund that has a long-term track record.

Birla Midcap has not been the best performing fund in this space. While it has turned in a return of about 60 per cent over the past year, its performance has trailed that of both Prima and Sundaram Midcap. Given such a showing, fresh exposures may be avoided for now.

Suitability: Investing in mid-cap stocks assumes higher risk as they are more volatile and less liquid. For an investor looking for an exposure to mid-cap stocks via mid-cap funds, Franklin Prima should be the top choice. Those with exposures to Birla Midcap may retain it if they wish to have a diversified portfolio. The fund should not, however, form part of your core portfolio.

Performance: Launched in late 2002, the fund has never seen a bear market. In 2003 and 2004, it delivered returns of over 100 per cent and 30 per cent respectively, enough to please most investors.

Its performance, however, trails its benchmark, CNX Midcap 200, by several percentage points. This, in itself, may not be viewed as a poor performance, as mid-cap funds have rarely managed to beat the CNX Midcap 200. The benchmark index has generated a return of more than 80 per cent over the past year, while Prima, the top performing mid-cap fund, delivered about 65 per cent.

But its performance over the past year does lag its peers, including diversified funds that have a strong bias towards mid-caps, such as HDFC TaxSaver and PruICICI Taxplan.

Portfolio overview: The fund holdings are concentrated in the pharmaceutical, banking and IT sectors, which account for about 45 per cent of the assets. Within sectors, however, its holdings are spread across a number of stocks. The portfolio sports about 35 stocks, which is a large number considering the small asset base of Rs 130 crore. This increases the number of right calls the fund manager has to make.

Compared to other mid-cap funds, Birla Midcap has more flexibility to invest in stocks that have a larger market capitalisation and promise better liquidity.

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