MF Tracker: Can Motilal Oswal Midcap Fund retain its edge after topping the 5-year return chart?

Motilal Oswal Midcap Fund delivered a CAGR of 21.26% over the last five years, emerging as the top-performing equity mutual fund among nearly 212 schemes that have completed five years in the industry. With such an impressive track record, the key question now is whether the fund can sustain its outperformance and continue to attract investor interest in the years ahead.

Launched on February 24, 2014, the scheme is given three star rating by ValueResearch and Morningstar both.

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Based on the trailing returns, the scheme has managed to outperform its benchmark and category average in the last three months and five years. In the last five years, the scheme offered 21.26% CAGR against 17.64% by the benchmark and 15.47% as the category average.

In the last three years, the fund gained 18.42% and underperformed against its benchmark but outperformed the category average. The benchmark gained 18.81% whereas the category average was 17.81% in the last three years. In the last three months, the fund gained 6.97% compared to 3.93% by the benchmark and 4.73% as the category average.

In the last six months and one year, the scheme failed to beat its benchmark and category average both. In the last six months, the fund delivered 6.26% return against 8.40% by the benchmark and 10.02% as the category average. In the last one year, the fund lost 4.73% against 4.47% gain by the benchmark and 4.52% as the category average. Since its inception, the scheme has offered 20.10% CAGR.

Looking at the performance of this scheme based on daily rolling return the scheme offered 21.34% CAGR in the last 10 years, the highest in the mid cap category. In the last three and five years, the scheme offered 31.16% and 15.71% CAGR based on daily rolling returns.

Based on the yearly return of the last 10 years, Motilal Oswal Midcap Fund has offered the highest return in 2015 and 2024 among all mid cap funds. In 2015, the scheme offered 16.48% annual return and in 2024, it offered 57.13% annual return. In 2026, the fund is down 1.66%.

On the basis of yearly returns from 2015 to 2025, the mid cap fund has offered less returns compared to the highest return offered by its peers. In 2018, when the highest return offered was 3.51% by a mid cap fund, Motilal Oswal Midcap Fund lost 12.70% in the same time period.

In 2019, the fund gave 9.72% return. In 2020, the highest return offered by a mid cap fund was 88.40%, Motilal Oswal Midcap Fund offered 9.32% return.

In 2021, the highest return offered in the mid cap category was 63.78% and Motilal Oswal Midcap Fund gave 55.83%. In 2023 and 2024, the fund gave 41.68% and 57.13% returns respectively and in 2025, it lost 12.13%.

Expert comment on fund performance

Hrishikesh Palve, Director, Anand Rathi Wealth Limited analysed the performance and shared with ETMutualFunds that fund performance has been largely driven by a combination of concentrated portfolio and sector positioning and between 2021 to 2024, fund has been consistently outperformed most peers with annual returns in the range of 55% to 58%, which is largely due to concentrated stocks with 28 to 30 securities in the underlying portfolio.

The expert further said that additionally, fund has maintained higher exposure to sectors and companies such as IT and new-age businesses such as Paytm, Coforge, Zomato, Kalyan Jewellers, and Jio Financial Services which were strong performers and major contributors to performance during that period and portfolio is relatively concentrated, with the top 10 holdings accounting for nearly 55% to 60% of the portfolio.

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“Overall, sector allocation with a concentrated portfolio has been the primary driver of the fund's superior returns,” Palve said.

A monthly SIP of Rs 10,000 made in the fund three years ago would have been Rs 4 lakh now with an XIRR of 7.07%. In the last five years, the same investment amount would have been Rs 8.97 lakh with an XIRR of 16.19%. A monthly SIP of Rs 10,000 made at the time of inception of the fund would have been Rs 49.44 lakh with an XIRR of 17.92%.

A lumpsum investment made in the fund at the time of inception would have been Rs 9.72 lakh now with a CAGR of 20.09%. In the last three and five years, this investment amount would have been Rs 1.65 lakh and Rs 2.62 lakh respectively.

Can the fund sustain its outperformance over the next 3-5 years?

Palve said that Motilal Oswal Mid Cap Fund’s exceptional performance over the recent years has been driven by fund's key holdings such as BSE, MCX, Zomato, Kalyan Jewellers, Dixon Technologies, PB Fintech, and Groww, which have undergone significant valuation re-rating in recent years, which was a major contributor to past returns. However, going forward, further upside is likely to be driven by sustained earnings growth than on valuation expansion.

He further said that the fund's portfolio is currently trading at relatively elevated valuations, with a portfolio PE of around 46 against category average of 32 to 34 which indicates many of underlying stocks are at elevated valuation, so the scope for same performance as seen in the past 5 years appears lower.

He further said that for investors it is suggested to invest across the diversified equity funds such as flexi, multi and strategy based funds like value, dividend yield and focused which reduces concentration risk of any single fund or category performance and helps to ride across market cycles.

The mid cap fund had an allocation of 97.11% in equity and 2.89% in others as on June 2026. In comparison to the mid cap category, the scheme is overweight on equity. The mid cap category on an average had 95.19% in equity, 4.60% in others and 0.21% in debt.

The fund had the highest allocation in IT of around 24.89% compared to 7.92% by the category. Among the top 10 sector holding, the scheme is overweight on every sector except for automobiles & ancillaries, and banks.

The PE and PBV ratio of the small cap fund were recorded at 50.66 times and 9.24 times respectively whereas the dividend yield ratio was recorded at 0.39 times as of June 2026.

ETMutualFunds analysed the other key ratios of the fund in a three year period. Based on the last three years, the scheme has offered a Treynor ratio of 1.30 and an alpha of (0.07). The sortino ratio of the scheme was recorded at 0.42. The return due to net selectivity was recorded at (0.29) and return due to improper diversification was recorded at 0.22 in the last three years.

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The investment style of the fund is to invest in growth oriented mid cap stocks. According to June 30, 2026 (last available portfolio), the scheme had 29 stocks in its portfolio and had an AUM of Rs 37,473 crore.

Valuations

According to a report by Tata Mutual Fund, Nifty is now trading at a reasonable PE of 21x and with earnings growth of 15-17% visible next financial year. This sets the tone for better equity returns in the next 12-18 months. Midcap and small cap premium has come down but risk reward and flows will still favor large caps more.

Midcap segment: Headline valuation premium for Nifty Midcap 100 vs Nifty 50 has climbed to 42% by the end of June 2026. Valuations presently are marginally expensive to their long-term average. The index valuations have corrected from the peak of mid 2024.

Smallcap segment: Valuations presently are marginally expensive to their long-term average. The index valuations have corrected from the peak of mid 2024. Amid high valuations within the small cap space vs large caps and global peers. Current valuation metrics suggest the relative attractiveness of large caps over mid and small caps as they offer better risk-reward.

Do current market valuations favour mid-cap funds?

Palve said that following the recent correction in equity markets, valuations across the segments and market caps have moderated with negative froth of -8 to -12% across large,mid and small caps. Which suggests that valuations across the market caps has become more reasonable with negative market froth.

However, for investors it is suggested to avoid to investing in any single market cap as it increases concentration risk associated with performance of any single segments instead investors are suggested to invest across diversified equity fund categories with 55:25:20 market cap mix across large, mid and small caps which helps to ride across market phases which maintaining stability & liquidity in the portfolio, the expert further said.

Others mutual funds in mid cap space

Apart from Motilal Oswal Midcap Fund, there are 24 funds in the mid cap category. HDFC Mid Cap Fund delivered the second highest return of 19.22% in the last five years, followed by Invesco India Midcap Fund which gave 19% return.

PGIM India Midcap Fund delivered the lowest return in the last five years of around 10.94%, according to the data on ACE MF

Expert view on midcap segment

Palve said going forward mid cap category remains constructive, supported by continued domestic consumption, manufacturing revival, PLI led capex, and continued government spending in infrastructure, defence, and energy, these structural themes are likely to benefit small to mid-sized companies.

“Investors can choose investing through Lump sum or SIP based on their investment capital accessibility, for lump sum investors can consider investing in a staggered approach by investing in debt funds and gradually stagger into equities for 4 to 6 weeks and SIP investors can continue investing as SIP offers rupee cost averaging during market falls which helps to buy more units at same SIP and allows to create better purchase cost.”

Additionally, investors can consider taking mid cap exposure by investing across the diversified equity fund categories with market cap mix of 55:25:20 which reduces concentration risk and allows broader diversification across the segment and sectors, Palve said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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