The HDFC Mid Cap Opportunities Fund is one of the top performing mid cap mutual funds in India that aims to provide long term capital appreciation by investing predominantly in mid cap stocks. With a focus on consistent returns through all market cycles, this fund can be an ideal choice for investors looking for a high growth mid cap scheme for their portfolio.
Overview of HDFC Mid Cap Opportunities Fund
The HDFC Mid Cap Opportunities Fund is an open ended equity scheme that invests predominantly in mid cap stocks to generate long term capital gains. Launched in February 2007, this fund is managed by Chirag Setalvad and center caps are defined as stocks ranging from 101st to 250th company in terms of full market capitalization.
The fund typically holds around 50-75 stocks spread across various mid cap companies and sectors. The core portfolio is built with a buy and hold strategy, while some timely trading is done to capitalize on short term opportunities. The fund follows a combination of top down and bottom up approach in stock selection with a focus on sustainable growth companies.
Some key features of the HDFC Mid Cap Opportunities Fund:
- Primarily invests in mid cap stocks with high growth potential
- Aims for long term capital appreciation
- Moderately high risk and return profile
- Equity linked saving scheme (ELSS) with 3 year lock-in period
- Minimum investment of ₹500 for lumpsum and ₹500 for SIP
Fund Performance over the Years
The HDFC Mid Cap Opportunities Fund has consistently been among the top performing mid cap mutual funds in India. Here is a look at the fund’s performance over the years across different time frames:
1 Year returns: The fund has given 9.04% returns over the past 1 year as of 31 Jan 2023, outperforming its benchmark S&P BSE 150 MidCap TRI which gave 1.78% returns.
3 Year returns: Over the 3 years, the fund has delivered 20.55% annualized returns compared to 17.73% returns by its benchmark.
5 Year returns: For the 5 year time frame, the fund has generated stellar 18.68% annualized returns, significantly higher than its category average of 13.25%.
Since Inception: Since its launch in February 2007, the fund has delivered 18.96% annualized returns, outpacing its benchmark by a wide margin.
The fund has consistently ranked among the top mid cap funds in the country across short, medium and long term horizons. It has successfully leverage growth in mid caps over different market cycles to deliver healthy alpha.
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Fund Managers
The HDFC Mid Cap Opportunities Fund is managed by **Chirag Setalvad** since its inception in 2007. Setalvad has over 21 years of experience across different market cycles. He focuses on sustainable growth companies and follows disciplined portfolio construction to tap into mid cap opportunities.
Setalvad is supported by a dedicated research team that evaluates mid cap stocks based on their business model, competitive position, quality of management, growth prospects and valuations. The fund adopts a process and team-driven approach to investing.
Investment Strategy
Here are some of the key features of the investment strategy followed by the HDFC Mid Cap Opportunities Fund:
- Primarily invests in mid cap stocks listed in India with a focus on sustainable growth.
- Aims to hold around 50-75 high conviction mid cap stocks in the portfolio.
- Follows a buy and have approach for core portfolio, with some trading to capitalize on short term mispricing.
- Uses a combination of top down and bottom up approach for stock selection.
- Evaluates stocks on parameters like business model, industry dynamics, company’s financials, management quality etc.
- Balances portfolio across market cap and sectors to mitigate risk.
- Actively rebalances portfolio and exits non performing stocks.
The fund aims to leverage growth potential in mid caps through disciplined investing with relatively lower churn. Long term wealth creation is the key priority.
Portfolio Composition and Top Holdings
As of 31 January 2023, the HDFC Mid Cap Opportunities Fund had assets under management of ₹23,324 Crores. The portfolio is well diversified with 50 stocks spread across sectors.
| Portfolio | Stocks |
|---|---|
| Top Sectors | The fund allocates around 30% in Financials, 13% in Chemicals, 9% in IT and 7% in Consumer Durables. This sector allocation taps into the growth areas in mid caps. |
| Top Stocks | Some of the leading stock holdings are Cholamandalam Investment (5.7%), ICICI Securities (4.8%), Indian Energy Exchange (4.7%), PI Industries (4.5%) and APL Apollo Tubes (4.4%). |
The portfolio has a blend of high conviction mid cap stocks with strong competitive position and growth prospects. The fund aims to ride growth in mid caps through disciplined stock selection.
Risk Profile
The HDFC Mid Cap Opportunities Fund has a moderately high risk profile as per its positioning as a mid cap fund. Here are some of the key risks involved:
- Mid caps have relatively higher volatility compared to large caps, exposing the fund to market fluctuation risks.
- The fund has concentration risk as the portfolio is not as diverse as a multi cap fund.
- Mid cap segment tends to be more impacted by economic downturns.
- Focus on growth stocks can underperform in a value driven market.
However, the fund aims to mitigate above risks through diversification across sectors/stocks and active rebalancing based on evolving market conditions. Investors should have at least 5 year investment horizon.
Who Should Invest?
The HDFC Mid Cap Opportunities Fund can be suitable for:
- Investors looking for a high growth mid cap mutual fund for their core portfolio
- Those aiming for long term capital appreciation through mid caps
- Individuals willing to accept moderately increased risk for higher returns
- Investors with at least 5-7 year investment horizon
- Those looking for a tax saving option under Section 80C for ELSS
- Investors looking to capitalize on India’s mid cap growth story
The fund may not suit conservative investors averse to mid cap volatility or focused only on short term horizon.
How to Invest?
One can invest in the HDFC Mid Cap Opportunities Fund through the following ways:
| HDFC | Invest |
|---|---|
| Lumpsum Investment | Invest one time with a minimum of ₹500. No upper limit. |
| SIP Investment | Invest regularly every month with a minimum of ₹500 per SIP installment. Ideal for goal based investing. |
| SWP | Withdraw periodically to meet income needs or book profits. Minimum ₹500 per SWP. |
| STP | Transfer money systematically from another fund into this fund through STP. Minimum ₹500 per STP. |
You can purchase the fund directly from HDFC Mutual Fund through their website or app or from online platforms like Groww, Paytm Money etc. One can invest in direct plan to save on commissions.
Conclusion
The HDFC mid cap opportunities fund is one of the top mid cap mutual funds for investors targeting long term capital appreciation through mid caps. It has consistently delivered healthy returns across market cycles thanks to its disciplined investment approach focused on sustainable growth companies. Though relatively riskier than large caps, mid caps present higher growth potential over long term. For investors with 5 year plus investment horizon and moderate risk appetite, this fund can be an excellent addition within the mid cap allocation of their portfolio.
