Friday, May 29, 2009

Indian mid cap funds goes up 1.5x large cap funds - Now what?

The biggest beneficiaries of the recent stock market rally are the mid cap and small cap segments. Over the last two months (since March 27, 2009 to May 27, 2009), BSE Sensex is up 40.4%. On the other hand its contemporaries, BSE Midcap and BSE Smallcap indices, has risen by 67.0% and 79.0% respectively.

Similar performance is replicated by the mutual funds in the large cap and mid cap categories as well. Graph below depicts the performance of both these categories over the last two months. While the returns generated by the mid cap funds in the recent times are great, investors should not get blindly carried away with their performance.

It should be well understood that investments in mid caps are a typical high risk-high return investment proposition. Investors must acknowledge the above-average risk associated with these investments before making the final investment decision. However, for investors who have the requisite risk appetite, it’s the right time to invest in well-managed mid cap funds.

At PersonalFN, we regularly update our clients through our INVESTMENT IDEAS NOTE - about what is happening in the markets and what should be their future course of action. In our latest issue we have analysed the factors that could take the index to 21,000 by mid 2010.

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