The Mutual Fund Show: Can Mid-Cap Schemes Fetch High Returns?

Investors should consider exploring mid caps as a category, according to Anant Ladha, founder of InvestAajForKal. "We must rationalise our expectations for returns, as currently investors are anticipating returns of over 20%," he said.

In the next two years, there could be some fluctuations and instability in this sector (mid-cap), making it an opportune time for investing in SIPs. However, if you are considering investing lump sum in this sector, it is advisable to reconsider and evaluate it from a valuation standpoint as well, advised Ladha.

The period when fund managers struggle the most is when they do not observe adequate corporate earnings, according to Satish Mishra, fund manager at Tata Mutual Fund.

In terms of challenges that a fund manager faces, he said, "Currently, corporate earnings are not strong. So, life is not very challenging at the moment. Some challenge arises from the valuation perspective."

When considering returns, it is important to connect them to the broader economic context. Over a 5-10 year time frame, and in light of India's focus on manufacturing policy, it is anticipated that the earnings growth within this sector will experience a modest increase of 13-15%, Mishra said.

"Given the current circumstances, it is likely that there will be a favourable outcome rather than a negative one, in terms of the returns that investors can anticipate from mid-cap indices," he said.

According to Ladha, investors considering a five-year SIP should prepare for volatility. However, those opting for a seven-year SIP may find themselves in a more secure position.

He listed three important points to consider while selecting a fund:

• Select consistent performer fund, not the best performer.

• Always look for rolling returns.

• Check down-capture ratio.

"Your average SIP duration should be 1,400 days, provided the basics of the fund have not changed. You should at least give that much time to your fund manager before switching," said Ladha.

According to Mishra, "Your time frame must exceed five years. Individuals should only consider entering this category if they have a long-term outlook."