Between India’s largest listed companies and its smaller businesses sits another part of the equity market: the mid-cap segment. Nifty Midcap funds provide a route into this space through a portfolio of mid-sized companies rather than requiring you to invest in them individually.

The exposure can be created in different ways. An actively managed Midcap fund allows a fund manager to select companies within the scheme mandate. A passive fund instead builds its portfolio around a Midcap index. The Nifty Midcap 150, for example, represents companies ranked 101-250 within the Nifty 500 based on full-market capitalisation. Other indices narrow that universe further, including the Nifty Midcap 50 and the Nifty Midcap Select.

You can consider investing in Nifty Midcap funds if you’re:

• Looking beyond the largest companies: Midcap funds take your portfolio into the middle of the market-cap spectrum, providing access to businesses that sit between Large Cap and Small Cap companies.
• Your financial goal leaves room for market cycles: These stocks can experience noticeable short-term movements. A longer investment horizon can provide more time to navigate periods when this segment is under pressure.
• You prefer a passive approach instead of active management: Actively managed funds create portfolios based on their stock selection that may or may not beat the index. By investing in a Nifty Midcap fund, you receive exposure to a host of stocks in the underlying index without any fund manager bias.
• You are prepared for market volatility: Mid-cap funds can see significant changes in value as market conditions shift. Consider whether you would be comfortable remaining invested through both stronger and weaker phases.

Nifty Midcap funds work by collecting different sums of money from investors, either in the form of SIPs or through a lump sum amount. The fund then invests this money in companies that fall under the index it tracks within the mid-cap space.

Let’s say you invest Rs. 60,000 in a Nifty Midcap fund.

Now, your sum of Rs. 60,000 is spread across all the companies in the fund’s portfolio, as per the index allocation. Suppose the value of the portfolio rises by 8%. Then, theoretically, your invested sum of money would be:

Rs. 60,000 + (Rs. 60,000 x 8%) = Rs. 64,800

However, you must note that the value can fall too. If it falls by 8%, then your invested sum of money would be:

Rs. 60,000 - (Rs. 60,000 x 8%) = Rs. 55,200

These figures simply illustrate how a percentage movement affects an investment. They do not indicate what a Nifty Midcap fund will actually return.

If you invest in an active fund, the dedicated fund manager will actively track the market and decide which stocks to buy, hold, or sell. In index funds, there is no active fund management, and returns are linked to the particular index.

There are multiple types of Nifty Midcap indices, each covering a different set of mid-cap companies:

• Nifty Midcap 150: This index includes a list of 150 companies that are ranked from 101 to 250 within the Nifty 500. This kind of fund gives broad exposure to the mid-cap segment.
• Nifty Midcap 100: This index includes a list of 100 mid-cap companies. This kind of index provides a smaller basket of stocks than the Nifty Midcap 150.
• Nifty Midcap 50: This index prioritises the top 50 companies with traded derivative contracts, all from the Nifty Midcap 150 list.
• Nifty Midcap Select: This index is more focused and contains just 25 stocks selected from the Nifty Midcap 150 list.

Thus, two funds described as Midcap Index funds need not give you the same exposure. Always identify the benchmark before comparing schemes.

Here’s how investing in Nifty Midcap funds can benefit you:

• Broader exposure within the Midcap space: Your investment is spread across several mid-sized companies rather than depending on the performance of a single stock.
• The portfolio is already put together for you: In the case of a passive Nifty Midcap fund, you do not have to research individual companies or decide which stocks to buy and sell. The portfolio is built to follow its own underlying index.
• The benchmark sets the framework: Rather than reflecting the fund manager's whims, when you invest in a Nifty Midcap fund, companies are selected according to the index's methodology.
• You have a clear reference point: Since the fund follows an identified benchmark, you can compare its performance with the underlying index and see how closely the two have moved over time.

Given that Nifty Midcap funds invest in equities, they carry certain risks:

• Price movements can be pronounced: Midcap stocks can experience sizeable swings as market conditions change. When this part of the market comes under pressure, those movements can be reflected in the value of your equity funds.
• There is no fixed income: Investing in a Nifty Midcap fund does not assure a fixed return. Performance follows the underlying portfolio, which means periods of negative returns are possible.
• The portfolio will not remain exactly the same: Index constituents are reviewed periodically. When companies leave or enter the underlying benchmark, a passive fund adjusts its holdings to remain aligned with the revised index.
• Your exposure remains centred on one market-cap segment: Holding several companies provides diversification within the mid-cap universe, but it does not remove the concentration that comes from staying within the same market-cap category.

Here are a few simple steps:

• Time in the market beats timing the market: Make sure your investment horizon is long enough for the fund to grow. Ideally, set these funds aside for at least 3 to 5 years to allow meaningful growth through volatility.
• Make use of SIPs: By investing at regular intervals through SIPs, you can stay invested across different market levels.
• Diversify: Do not depend on only one category of mutual funds to meet your financial goals. Multi cap funds, for instance, spread their equity exposure across large-cap, mid-cap and small-cap companies.
• Check the risk: All mutual fund schemes are mandated by SEBI to disclose their risk level by way of a Riskometer. Make sure to check the same before investing.

There are multiple Nifty Midcap funds to choose from. Here is what to keep in mind before choosing a particular fund:

• Start with what the fund actually tracks: Identify whether the scheme follows the Nifty Midcap 150 or another Midcap index. The benchmark tells you which part of the Midcap universe your money will be exposed to.
• Put risk alongside return: Review the scheme’s Riskometer and consider whether the indicated risk level is one you are comfortable taking, rather than focusing only on past performance.
• See what the exposure costs: Compare the expense ratio across relevant schemes. Since these costs are charged to the fund, they can influence the returns that ultimately reach you.
• Bring the choice back to your objective: Consider why you are investing, when you may need the money and how the fund fits with the investment you already hold.

Starting with Nifty Midcap funds on Millions is an easy process:

• Download the Millions app from the Google Play Store or the iOS App Store.
• Enter your details to create your account and complete your KYC.
• Log in and search for all available Nifty Midcap funds on the platform.
• Review the expense ratio, Riskometer and other relevant scheme details.
• Enter the exact amount you want to start investing with, choose your SIP date, and complete the payment.