NFO Insight: Choice Large & Mid Cap Fund is open for subscription. Is this the right time to invest?

Choice Mutual Fund has launched Choice Large & Mid Cap Fund, its first actively managed equity fund, which is open for subscription and will close on November 3.

Investment strategy

According to a press release by the fund house, the stocks will be selected using GVOTE, Choice AMC’s internal framework. It tests each company on Growth, Value, Operating earnings, Trajectory and Excellence, against its sector peers. The scores are then confirmed through research and an Investment Committee review.

What does Choice Mutual Fund’s CEO and Deputy CEO say on fund launch

Ajay Kejriwal, CEO: This launch reflects the next step in how we are building Choice Mutual Fund. Our equity schemes so far have been index funds, and with the Choice Large & Mid Cap Fund we now offer an actively managed equity scheme. The mandate is simple to explain: at least 35% each in large and mid cap companies, with the fund manager selecting stocks within it.


Also Read | Top 9 equity mutual funds deliver over 20% return on SIPinvestments in 1 year. Do you own any?

Manish Jain, Deputy CEO: Many investors hold a large-cap fund and a mid-cap fund separately, and have to decide when to rebalance between them. This fund brings both into one scheme and one SIP, and the minimum mix is built into the mandate. It reflects our focus on giving investors a simple, structured way to stay invested for the long term

What does an expert say on this NFO

Experts typically ask investors to avoid investing in NFOs unless they offer something unique. The uniqueness could be that the scheme is offering an investment option that is not available in the market or offering something extra to an existing option. Otherwise, the experts believe investors are better off with an existing scheme with a long performance record. This is because you have some historical data to base your investment decision. You don’t have any data when it comes to new offerings.

Shivam Pathak, CFP and Founder of Asset Elixir told ETMutualFunds that the fund will invest across large- and mid-cap stocks, using the GVOTE framework shared by the fund house to evaluate growth, valuations, earnings, business momentum and management quality.

The key will be identifying mid-cap companies with sustainable earnings growth while avoiding businesses where valuations have run ahead of fundamentals, Pathak further said.

Highlighting the same investment approach, Chirag Muni, Executive Director, Anand Rathi Wealth Limited shared with ETMutualFunds that Choice AMC’s GVOTE framework evaluates companies on five parameters, which are Growth, Value, Operating earnings, Trajectory and Excellence. Each company is scored against its sector peers, with the scores further assessed through research and an Investment Committee review.

The fund will also look for companies with above-average growth potential, distinct competitive advantages and strong financials, along with stocks trading at relatively attractive valuations or businesses with value-unlocking potential. These criteria apply across both the large and mid cap universe, Chirag further said.

Valuations and time to invest in midcaps?

According to a report by a fund house, large caps have corrected enough for valuations to be near fair/cheap zones and SMIDs have seen less valuation compression and still need stronger earnings delivery to justify broad exposure.

The report further said that at present, SMIDs have a large alpha over large caps, so investors might be better served by focusing more on large caps as a relatively better option.

Chirag said that if we look at the current market, we can see that there is negative froth across. Nifty 50 is trading around 17% below its estimated fair value, while Nifty Midcap 150 is trading around 21% below.

Hence, the current market can be viewed as a great entry point for investors as there is strong upside potential over the long term and investors should stick to their long term strategy, and not base investment decisions on short term market movements, he further said.

Pathak said that large caps offer relatively better valuation comfort, while opportunities in mid-caps need more careful stock selection, investors can consider this category for long-term wealth creation, but should avoid investing only because of the NFO and the decision should depend on their existing portfolio, risk appetite and investment horizon.

Are separate large cap & mid cap funds better?

There are two different categories - large cap funds and mid cap funds. According to the Sebi mandate, the large cap mutual funds are mandated to invest in top 100 companies by market capitalisation. Large companies fare better in a volatile market as these companies may be market leaders and resilient to downturns.

Also Read | NFO Alert: Choice Mutual Fund launches large & midcap fund, its first actively managed equity fund

As per Sebi norms, the mid cap mutual funds are mandated to invest in companies that are between 101 and 250 in the market capitalisation. These companies can be leaders of tomorrow. That’s what makes them great bets. If these companies live up to the promise, the market will reward the investors handsomely.

The performance analysis of the last one year showed that large & mid caps on an average lost 3.53% in the last one year whereas in the same time period, large caps on an average lost 7.17% and mid caps gained 0.08%.

Asset allocation of Choice Large & Mid Cap Fund: The scheme must invest at least 35% each in large cap stock and mid cap stocks. Up to 30% may go to small caps and/or other permitted instruments.

Commenting on whether separate large cap and mid cap funds are better, Pathak said that a large- and mid-cap fund offers both exposures under one scheme, making portfolio management simpler. However, investors cannot reduce mid-cap exposure below the category's mandatory minimum of 35%, even when this segment faces pressure and those who want greater control over their allocation may prefer separate funds.

To this, Chirag said that investors should first decide the overall market cap mix they want to maintain, and then split that through pure large, mid and small cap funds, and then move to combination funds like large & mid caps, multi cap and flexi cap funds. Let’s say an investor wants to allocate 50% to large and 50% to mid, then a small portion can be allocated to large & mid cap funds.

“Through the fund manager strategy, market cap shifts, stock selection and the GVOTE framework, the fund is expected to navigate any volatility in the market. Investors should keep in mind that market ups and downs are a normal part of market cycles, and not a sign to panic. Mid caps are inherently more volatile than large caps, seeing an average drawdown of 22% every year, but recovering to previous peaks within 12 to 18 months,” he further said.

Others in large & mid cap basket

Around 26 large & mid cap funds have completed three years of existence in the market. Motilal Oswal Large & Midcap Fund delivered the highest return of around 18.96%, followed by Invesco India Large & Mid Cap Fund and Bandhan Large & Mid Cap Fund that gave 18.80% and 14.77% respectively in the last three years. Tata Large & Mid Cap Fund gave the lowest return of around 4.32% in the last three years.

Also Read | Best arbitrage mutual funds to invest in October 2026

Way ahead for large & mid caps

Chirag said that the outlook for large and mid caps is positive. We can see that Nifty 50 is expected to grow its earnings by 14% in FY27 and 15% in FY28, while Nifty Midcap 150 is expected to grow earnings by 10% in FY27 and 16% in FY28.

Hence, investors can continue backing the Indian growth story, and staying consistent with their investments, if they have SIPs running, they can continue them and those who have funds to invest as lumpsum can go ahead and invest in tranches across 4-6 weeks, he further said.

Pathak said that the long-term outlook for both segments remains positive, supported by India's growth potential, but mid-caps may experience sharper corrections when valuations are stretched, for fresh investments, I would prefer a staggered approach through SIPs, rather than committing a large lump sum at once and investors should ideally have a 5-7 year horizon and be prepared for short-term volatility.

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

If you have any mutual fund queries, message ET Mutual Funds on Facebook/Twitter. We will get them answered by our panel of experts. Do share your questions at ETMFqueries@timesinternet.in along with your age, risk profile, and Twitter handle.