Religare Invesco Mid Cap: Invest

Thanks to the rally in mid-cap stocks from August this year, the CNX Midcap Index has gained over 24 per cent in the last four months. Despite the rally, the valuation of mid-cap stocks continues to remain attractive. There is also a substantial value gap with large-cap stocks. It may hence be an opportune time for investors with a moderate risk appetite to invest in quality mid-cap schemes with a good track record.

Religare Invesco Mid Cap is one such scheme that has managed to deliver well over three-, and five-year periods, placing it in the top quartile of its category. The fund has also been successful in outdoing its benchmark, the CNX Midcap Index, across all time frames and market cycles. Investors with a three-to-five-year horizon can park a portion of their surplus in this fund.

The fund has demonstrated consistency in long-term performance. Its one-year return has been higher than the CNX Midcap Index 81 per cent of the time in the last five years. It has done better than peer funds — Canara Robeco Emerging Equities, Tata Midcap and IDFC Sterling Equity — across one- and three-year time frames.

In the past, Religare Invesco Midcap has been successful in outpacing CNX Midcap Index during market rallies. For instance, during the rally that commenced in March 2009 and lasted up to November 2010, the fund’s NAV surged 3.4 times while the CNX Midcap Index rose 3.2 times.

During the December 2011-January 2013 period too, the fund’s NAV jumped 41 per cent, higher than the 36 per cent rise in CNX Midcap Index. Exposure to banking stocks, such as YES Bank, ING Vysya Bank, J&K Bank and City Union Bank lifted the fund’s NAV.

The fund not just outperformed during rally phases but has also managed to curtail downsides during corrective phases. For instance, during the November 2010-December 2011 correction, it managed to arrest the fall in NAV at 25 per cent while the CNX Midcap Index lost almost 37 per cent during the same period. Reducing exposure to entertainment stocks, such as DQ Entertainment and Hathway Cables, and other volatile stocks such as SpiceJet, BGR Energy and Future Retail aided performance.

The fund’s strategy to take refuge in defensives helped it to tide over turbulent times. A systematic monthly investment of Rs 1,000 in Religare Invesco Midcap over the last five years would have yielded 13.9 per cent annually. The fund held 49 stocks as of November. Anticipation of a recovery in the country’s economic prospects may give a leg up to cyclical themes, such as industrial capital goods, engineering and rate-sensitive financials.

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