For those looking for the next multi-bagger mid-cap stock, the portfolio holdings of mid-cap funds are a good place to start.
Such equity mutual funds are mandated to invest at least 65 per cent in mid-cap stocks, which are shares of companies that are ranked between 101 and 250 in the overall list in terms of market value (capitalisation).
Smaller companies may have a lot of issues that may not be evident at first glance. Since MFs do their due diligence and research before picking mid-cap stocks, it's a good way to bet on stock ideas already validated by a third-party such as an institutional investor like mutual fund houses.
Here are details of the most popular stocks held by the 28 mid-cap funds in this category:
Mid-cap fund portfolios
From a category average perspective, mid-cap funds typically hold 14 per cent in large-cap stocks, 67 per cent in mid-cap, 14 per cent in smallcap, and the rest (around 5 per cent) in others/cash, etc.
In this study, we found that the mid-cap fund portfolio holdings varied with 12 being the minimum and nearly 84 being the maximum. The low-asset funds in the mid-cap space had a lower stock count, whereas the bigger ones diversified into many securities.
Some of the biggest and most well-known mid-cap funds include HDFC Mid-Cap Opportunities, Kotak Emerging Equity, Axis Midcap, DSP Midcap, Nippon India Growth and Mirae Asset Midcap. From a sectoral perspective, the 28 mid-cap funds have exposure to 9 to 30 sectors.
Finance is the dominant sector with 9.86 per cent weight at a mid-cap fund category level, followed by industrial products (9.38 per cent), banks (7.83 per cent), consumer durables (5.6 per cent), auto ancillaries (5.5 per cent), pharmaceuticals (4.94 per cent), software (4.75 per cent), chemicals (4.35 per cent) and industrial capital goods (4.32 per cent).
Most popular stocks in mid-cap funds
Using ACEMF category snapshot data, we scanned the portfolios of all mid-cap equity funds and found the most popular stocks in portfolio holding.
Here are the most popular stocks:
- The Federal Bank: This private-sector lender is a pioneer in India for being the first bank to digitalise all its branches in the country. The stock is held across 20 mid-cap fund portfolios (almost 72 per cent).
- (Also No.1) Max Financial Services: It is part of the Max Group, the holding company for Max Life — India’s largest non-bank, private life insurance firm. Its stock is also held by 20 mid-cap funds.
- Cholamandalam Investment and Finance: Incorporated in 1978 as the financial services arm of the Murugappa Group, it has emerged today as a comprehensive financial services provider offering vehicle finance, home loans, home equity loans, SME loans, investment advisory services, stock broking and other offerings to customers. The stock is held in as many as 19 midcap fund portfolios.
- Crompton Greaves Consumer Electricals: One of the leading consumer companies in India with over 90 years of brand legacy, it operates under two business segments — lighting and electrical consumer durables. The stock is a portfolio across 18 mid-cap funds.
- The Indian Hotels Company: The company and its subsidiaries bring together a group of brands and businesses including ‘Taj’, ‘SeleQtions’, ‘Vivanta’ and ‘Ginger’. The stock is held by 17 midcap fund portfolios.
After the creme of most popular stocks in midcap funds, lies Bharat Electronics (BEL), Ipca Laboratories, Coromandel International, Schaeffler India and Supreme Industries. Notice how BEL, a PSU stock, has made it into the list — perhaps on account of its strength as an aerospace and defence electronics company.
Top midcap stocks bought and sold
As per the latest (August 2022 portfolio data), we also have insights about top buys and sells in the mid-cap stock space across the MF universe. The following data is based on the market value of stocks in the said month vis-a-vis the previous month (July 2022).
In August 2022, HDFC AMC was the most-bought midcap stock, followed by Sona BLW Precision Forgings, Bosch, L&T Finance Holdings, SAIL, BHEL, PB Fintech, CRISIL, Punjab National Bank and AU Small Finance Bank.
Portfolio churns are common in terms of top sales. The top 10 mid-cap stocks offloaded include Varun Beverages, IDFC First Bank, GMR Infrastructure, Vodafone Idea, NMDC, L&T Technology Services, Laurus Labs, ICICI Securities, Ashok Leyland and Navin Fluorine International.