This midcap fund generated 35 per cent SIP returns in the last three years. But is it worth investing?

Axis Midcap Fund bears a five-star rating from a widely used mutual fund research platform. Read on to find out whether it deserves your attention.

Usually, while investing in a mutual fund, investors go on the popular mutual fund research websites, and invest based on the high rating or ranking provided by them without further researching. As is the human tendency, investors as well would look at historical trailing returns and assume that the fund would continue to perform similarly.  

But this is something that severely dents the portfolio of an investor. Hence, it makes complete sense to research mutual funds before you invest. In this article, we would be evaluating the performance of Axis Midcap Fund that has been rated five-star by one of the widely used mutual fund research platform.  

Axis Midcap Fund is a mutual fund scheme that invests predominantly in mid-cap stocks. It invests almost 72 per cent of its assets in mid-cap stocks as compared to the category average of 83 per cent. This fund is overweight on large-cap stocks when compared with the category.  

Not just that, but the fund has around 10 per cent of its assets under management (AUM) allocated towards debt instruments and it is helping the fund to contain downside risk. The fund has diversified its assets across 61 stocks having an AUM of Rs 15,988 crore as of October 2021.   

So, does this fund deserves your attention? To understand the same, we would be looking at its performance considering risk as well as returns metrics and compare the same with its category and benchmark. Its benchmark is S&P BSE Midcap Index. We have taken 10 years of historical net asset value (NAV) data for our study where we have calculated one-year, three-year and five-year rolling returns to understand returns consistency. On the risk front, we would be analyzing its standard deviation, downside deviation, Sharpe ratio, Sortino ratio and maximum drawdown.  

 
Performance of Axis Mid Cap Fund 

Is it worth investing in?  

When we compare the performance of Axis Midcap Fund with its category and benchmark, it did show better performance over them. This is very well evident in the graphs above. Looking at the rolling returns graph, we can see that across time frames, Axis Midcap Fund has outperformed its category and benchmark. On the risk front, the fund poses a lower risk compared to its category and benchmark as demonstrated by risk parameters such as standard deviation, downside deviation and maximum drawdown. We have worked on the data that roughly covers two market cycles, here we have witnessed that Axis Midcap Fund fell the least among other funds in the category. This is evident if we look at the maximum drawdown metric in the above graph.  

Therefore, on a risk and returns basis, this fund has performed quite well. However, here we have only done the quantitative analysis for the fund. But before investing, doing qualitative analysis is equally important. By qualitative analysis, we mean looking at the fund’s portfolio, sectoral allocation, fund manager, investment philosophy, etc.  

Just to give you an idea, the fund has fallen less compared to its category for two major reasons. Firstly, the fund is overweight on large-cap stocks when compared with category and holds 10 per cent of its assets in debt instruments. Another important thing to understand is your risk appetite. Before investing in this fund or in any fund for that matter, you should understand how much risk you can stomach.