Is it worth investing in large & mid-cap mutual funds?

Securities and Exchange Board of India (SEBI) provided guidelines in respect to the categorization of mutual funds in which it introduced the new category viz. Large & mid-cap funds, via its circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 6, 2017. According to this guideline, the large and mid-cap funds can invest in both, i.e., large-cap as well as mid-cap stocks. However, they do come with certain restrictions. They need to invest a minimum of 35 per cent of the total assets in equity and equity-related instruments of large-cap companies and minimum 35 per cent of the total assets in equity and equity-related instruments of small-cap companies. Still, mutual funds are trying to match this mandate.
 
Now the question is whether is it advisable to invest in large and mid-cap category funds? To answer this question let us first look at the 1-month, 3-month and 6-month performance of funds to understand how they have been moving. We have not considered one-year and above time-frame as it may be misleading because many fund houses have changed their holdings following the changes in the SEBI mandate. So if we look at the 1-month, 3-month and 6-month average returns, they stand as -0.92 per cent, 6.34 per cent and -3.20 per cent, respectively. These returns generated are kind of volatile and this is due to the fact that mutual fund houses are still trying to match with the mandate. It is to early to comment on these funds. It would be advisable to allow these funds to settle down and then review once they have adjusted as per the mandate. So frankly speaking, as of now you may very well avoid this category. Rather you would be better off investing in large-cap funds and mid-cap funds, separately.