Mid- and small cap indices bounce back in two months. How about your mutual funds?

Mid cap category generated negative returns (-12%) in the calendar year 2018. However, the category managed to offer a meagre year-to-date return of 0.58%.

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The broader mid and small cap indices have managed to recover some grounds after plumbing the depths for almost 18 long months. BSE Mid cap index has risen by 10% and small cap jumped by around 8% in the last two months, after losing 27% and 38% respectively between January 2018 and August 2019. Does this signal the revival of the fortunes of these segments? That is what every investor would love to know.

To find the answer to the question, ETMutualFunds.com looked at the recent returns generated by mid cap funds and small cap funds. And we found some interesting things.

Mid cap category generated negative returns (-12%) in the calendar year 2018. However, the category managed to offer a meagre year-to-date return of 0.58%. The average returns still do not look impressive. However, the positive return is indeed comforting when compared to the double-digit loss.


Similarly, the average return of small cap funds category has improved from -17% in the calendar year 2018 to -2.51% in the year to date. Note, the category is still suffering losses.

Average monthly returns of mid cap category have shown great improvement in September and October. The returns stood at 5.66% and 5.01% respectively, after logging returns in the range of -8.67% and 1.98% in the previous five months. Similar trend has been seen in the small category. Look at the table below for more numbers.

Also look at minimum and maximum monthly returns logged in by these two categories. The numbers show some improvement.
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Mid cap funds
Avg. returns Min. returns Max. returns
Oct-19 5.01 2.56 9.76
Sep-19 5.66 2.82 8.35
Aug-19 0.54 (2.15) 3.92
Jul-19 (8.67) (10.47) (6.05)
Jun-19 (1.33) (2.78) 0.63
May-19 1.98 (0.68) 5.26
Apr-19 (2.38) (4.70) (0.82)
Mar-19 6.64 3.63 8.87
Feb-19 (0.65) (2.31) 1.97
Jan-19 (4.99) (6.49) (3.09)

Small cap funds
Avg. returns Min. returns Max. returns
Oct-19 2.36 0.11 4.54
Sep-19 5.63 4.03 7.56
Aug-19 0.28 (4.56) 5.69
Jul-19 (9.71) (14.60) (5.94)
Jun-19 (2.82) (5.74) (0.07)
May-19 2.74 (2.33) 6.91
Apr-19 (2.95) (6.73) (0.43)
Mar-19 7.75 3.76 11.56
Feb-19 (1.67) (3.51) 0.81
Jan-19 (5.47) (7.38) (2.89)
Source: Ace MF, Value Research

The two-month data looks bright, but it is a very short period to confirm whether the much-awaited revival is in the making. These segments may gain if the liquidity-driven rally continues for some more time. However, a strong revival is not possible unless the economy bounces back convincingly.

Also read: Mid cap and small cap mutual fund schemes on the path of revival?

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