The mid- and small-cap category has been outperforming the bellwether indices over the last three years. While Nifty and Sensex have delivered about 11.8 per cent and 10.5 per cent returns, respectively, the mid- and small-cap segment delivered a much higher return of 27 per cent during this period.

Nonetheless, the mid- and small-cap space is more prone to market volatility. Therefore, it suits investors with higher risk appetite and long-term horizon of, say, more than five years.

Investors could consider buying units of Mirae Asset Emerging Bluechip, a chart topper and consistent performer in the mid-cap segment. The fund has given returns of 35.9 per cent and 40 per cent over three and one-year periods, respectively, beating the benchmark index Nifty free float midcap 100 by 6 to 8 percentage points.

Over the past five-year period, Mirae Asset Emerging Bluechip is a table topper, delivering 29 per cent returns. The fund ranks in the top quartile, within the category, over all timeframes.

The fund has delivered higher returns than peers, such as Franklin India Prima, HDFC Mid-Cap Opportunities and Sundaram Select Midcap. Due to market volatility and strong surge in the mid-cap index in recent times, the level of outperformance has, however, narrowed. Thus, investors can add more units through the systematic investment plan (SIP) route.

Performance and strategy

The fund’s stable performance and ability to contain downside risk make it a relatively safe bet in the risky mid-cap category. During the 2011 and 2013 downmarket, the fund contained its losses well. The fund’s best performance was in the year 2014 when it gained 84 per cent, making hay during the market rally. The fund also surged 40 per cent against its benchmark’s 33.7 per cent rise over the last one year.

The fund bets on a blend of both value as well as growth stocks and largely follows a buy and hold strategy. It has increased its exposure to large-caps to 36 per cent currently in light of volatile markets. The fund’s 17 per cent exposure in small-caps can help spice up returns, though. The fund holds 60 stocks and mitigates risk with exposure to a single stock not exceeding 4 per cent. It takes active cash and debt calls when the markets turn volatile.

Banks and pharmaceuticals are the top preferred sectors, with current allocation of 14 per cent and 8.7 per cent, respectively. The fund is overweight on chemicals and textiles and underweight on engineering and IT sectors. Over the last one year, the fund has exited fertilisers and added textiles. Bets on Tata Steel and AIA Engineering have delivered good returns over the last one year.

In January, the fund exited some key stocks by booking profits, namely Mahanagar Gas, Sanofi India and Ramco Cements. It has added Raymond, Adani Ports and GAIL over the last one year, which continue to perform well.

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