As we move deeper into the first financial quarter of 2024, investors are strategically screening the market for rewarding investment options. With changes in the mutual fund industry mandates, large & mid cap schemes are becoming an attractive choice for investors seeking potential high returns balanced with reasonable stability.
As per these market offerings, a minimum of 35% of total assets must invest in both large cap companies and mid cap stocks.
Perceived Risk and Market Attraction
Understanding the nuances of these newly formed market offerings is pivotal for successful investment. Due to the mandatory 35% investment in mid cap stocks, potential risks arise, but still less than those of the pure mid-cap schemes investing around 65% in mid cap stocks.
Balancing this, the 35% allocation for large cap investments offers investors a sense of stability, albeit with more risk than pure large cap schemes.
Investor Advice and Market Navigation
These schemes, coupled with their inherent risk and reward ratios, are viewed as appealing for aggressive investors open to mid cap stock investments. The market conditions and the fund manager’s perspective significantly determine their exposure to large cap or mid cap stocks.
The fund managers have the leeway to allocate the remaining 30% of the corpus according to their perceived market attractiveness. Whether they hold a more favorable view of large cap stocks or they believe mid and small cap stocks are set to take off, this flexible region of the investment setup can alter the risk within these schemes.
Recommendations and Performance Overview
Investment advisors recommend that investors, particularly those with long-term horizons willing to take on additional risk, refer to their list of recommended large & mid cap schemes.
Some of the schemes forecasted to perform well include Axis Growth Opportunities Fund, Mirae Asset Large & Midcap Fund, Canara Robeco Emerging Equities Fund, Sundaram Large and Midcap Fund, Kotak Equity Opportunities Fund, and Quant Large & Mid Cap Fund.
However, their performance is dynamic and subject to market fluctuations. There have been shifts in position within the quartiles for funds such as Axis Growth Opportunities Fund, Canara Robeco Emerging Equities Fund, and Sundaram Large & Mid Cap Fund. The overall performance of all recommended schemes is closely monitored and updated every month.
Methodology and Risks Involved
The selection of these leading mutual fund schemes based on parameters such as mean rolling returns, consistency, downside risk, outperformance, and asset size. By employing the Hurst Exponent, a measure of the randomness of a fund, the consistency of a mutual fund scheme can be computed.
These calculations, paired with analyses of negative returns and the Capital Asset Pricing Model (CAPM)-predicted returns, inform the risk-adjusted return generated by a mutual fund scheme, leading to informed investment choices.
Ultimately, past performance is not a guaranteed predictor for future performance. However, a consistent, strategic approach, backed by a solid understanding of the market mechanics, can make large and mid-cap mutual fund investments a promising choice.
