MF Tracker: HSBC Midcap Fund turns Rs 10,000 SIP to over Rs 2 crore, emerges 3-year topper with 24% return

HSBC Midcap Fund turned Rs 10,000 crore monthly SIP to Rs 2.56 crore since its inception in August 2004 and emerged as the top performer in the last three years among all equity funds by delivering a CAGR of 24.13%, an analysis by ETMutualFunds showed.

The key question now is whether the fund can sustain its strong performance and maintain investor interest in the years ahead.

Launched on August 9, 2004, the scheme is given five star rating by Value Research and four star rating by Morningstar.


Based on the trailing returns, the fund has managed to outperform its category average and benchmark across all horizons. In the last three months, the fund delivered a return of 8.01% compared to 3.91% by the benchmark and 6.53% as the category average.

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In the last six months, the fund delivered a return of 19.83% compared to 7.98% by the benchmark and 10.27% as the category average. The fund posted a gain of 22.73% in the last one year compared to 9.97% by the benchmark and 9.59% as the category average.

The fund delivered a return of 24.13% in the last three years against 16.64% by the benchmark and 16.59% as the category average. The fund posted a gain of 18.36% in the last five years compared to 17.06% by the benchmark and 15.15% as the category average. Since its inception, the fund has delivered a CAGR of 18.36%.

Based on yearly returns in the last 10 calendar years, the scheme lost 12.03% in 2018, 0.15% in 2019 and 1.35% in 2025. The scheme gave 52.33% in 2017, 40.01% in 2023, and 39.73% in 2024. It gave 30.39% in 2021, 19.05% in 2020, 9.79% in 2016 and 1.07% in 2022.

What does the fund manager say?

Cheenu Gupta, Sr. VP and Fund manager, Equities: HSBC Midcap Fund follows a bottom-up stock selection approach, with a focus on identifying businesses that can deliver sustainable earnings growth over the long term. Our investment framework evaluates the quality of the business, the strength of its competitive positioning, management capability and its ability to execute strategy consistently, while remaining mindful of valuations.

This disciplined approach has enabled the fund to identify opportunities across sectors and participate in businesses supported by structural growth drivers. The consistency of this investment process is reflected in the fund’s strong performance across multiple time horizons. Across market cycles, our focus has remained on taking an independent view on stock selection and building a portfolio of fundamentally strong businesses with the potential to create long-term value, Gupta said.

Stock selection or sector allocation?

Bharath Rathore, Executive Director, Anand Rathi Wealth Limited analysed the performance and told ETMutualFunds that if we look at the last few years, we see that the major outperformance came in 2023 and 2024, where it delivered around 40% in both years.

Rathore said that the fund’s recent outperformance has been driven by the fund manager selecting the right stocks in the sectors that performed well; the fund delivered a 22.8% return versus around 9.6% for Nifty Midcap 150, showing an active return of around 13.2%.

The expert further said that if we analyse this, we see that the stock bets went the right way, with industrials being the biggest contributor, adding 7.6% of active return with most of the benefit coming from stock selection within the sector. Stocks within the financial services sector was another strong contributor, adding 3.3%. Overall, the numbers point to strong stock-picking as the key driver of the fund’s recent outperformance, rather than sector calls alone.

SIP and lumpsum performance

A monthly SIP of Rs 10,000 made in the fund in the last three years would have been Rs 4.72 lakh with an XIRR of 19.55% and in the last five years, the value of the same monthly investment would have been Rs 10.21 lakh with an XIRR of 22.05%. In the last 10 years, the value of the same monthly investment would have been Rs 31.65 lakh with an XIRR of 18.68%.

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A lumpsum investment made in the fund at the time of inception would have been Rs 47.67 lakh now with a CAGR of 19.12%. In the last three years, the same amount would have been Rs 1.91 lakh with a CAGR of 24.18%. The same lumpsum investment made five years ago would have been Rs 2.31 lakh with a CAGR of 18.26%. In the last 10 years, the same lumpsum investment would have been Rs 4.72 lakh with a CAGR of 16.80%.

Can strong returns continue, or is moderation ahead?

Rathore said long term investors can view this performance in HSBC Mid cap as a result of the recent rally we saw in mid caps, rising around 28% since April 2025 and around 19% since the correction in March 2026 and the fund has outperformed its peers, but other funds such as have also delivered greater than 20% over the 3-year horizon.

The expert further said that mid caps have been outperforming recently which shows in the fund’s long term returns. However, investors should keep in mind that mean reversion is common, where funds that are outperforming currently, tend to underperform over the next few years and sustained outperformance will also depend on the performance of sectors which the fund has the highest exposure in, which is Financial Services, Industrials and Healthcare.

“Overall, if we look at Nifty Midcap 150, the earnings are expected to grow by 10% for FY27, 33% for FY28 and 22% for FY29. Hence, strong performance can be expected for the market cap to continue over the long term, where short term fluctuations should be viewed as normal and a part of the journey,” Rathore said.

Valuations

According to a report by Motilal Oswal Private Wealth, the Nifty is now trading at a 12-month forward Price-to-Earnings (P/E) ratio of 18.9x, which is 10% below its historical average of 21.0x. Mid and small-cap equities’ 12-month forward P/E trades at a 16%/33% premium to their 10-year averages of 24.0x/17.5x but the extent of the premium has come down compared to Sep’24.

Is a staggered investment approach better amid current midcap valuations?

Rathore said if we look at Nifty Midcap 150, we are seeing it is currently trading around 13% below its estimated fair value. Hence, the index is seeing negative froth which can indicate that there is potential for future outperformance in mid caps.

The expert said that if investors have funds available, they can go ahead and invest in tranches over 4-6 weeks. Those doing SIPs can continue as usual. Investors should not look at short term market movements as indicators for their investment decisions, and focus on their long term strategy.

They should also not chase after this recent outperformance of the fund, as funds that are currently outperforming tend to move into the underperforming group due to cyclicality of performance and fund allocation decisions should be based on the long term fundamentals and overall portfolio suitability, rather than recent performance, Rathore further said.

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Key risk ratios in 3 years

Based on the last three years, the mid cap fund gave a Treynor ratio of 1.64 and an alpha of 0.39. The sortino ratio of the scheme was recorded at 0.56. The return due to net selectivity was recorded at 0.29 and return due to improper diversification was recorded at 0.09 in the last three years.

The investment style of the fund is to invest in growth oriented mid cap stocks. According to July 2026 (last available portfolio), the scheme had 79 stocks in its portfolio and the portfolio was spread across 23 sectors. The scheme had an AUM of Rs 15,578 crore as of July 31, 2026.

Others in the mid cap category

Around 25 funds in the mid cap category have completed five years of existence in the market. Out of these 25 funds, Motilal Oswal Midcap Fund delivered the highest return in the last five years of around 21.01% followed by HDFC Mid Cap Fund which gave 19.13% in the same period. PGIM India Midcap Fund delivered the lowest return in the last five years of around 9.95%.

Rathore said that Market cap exposure should not be viewed in isolation, and should always be seen on a total portfolio level; investors should maintain a diversified and balanced exposure across market caps, with 55% in large caps, 23% in mid caps and 22% in small caps. Large cap exposure can be taken through different categories other than just plain large cap funds, such as flexi cap funds, dividend yield funds, focused funds etc.

He further said that the outlook for mid caps is positive. Over the last 20 years, the Nifty Midcap 150 has seen an average drawdown of around 22% and most of these corrections lasted only three to four months, with markets typically recovering to their previous peaks within 12 to 18 months. Hence, any short term fall in this segment is normal and can be seen as a part of normal market cycles.

(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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