Mid-cap companies capture a period in the typical business life cycle where companies have successfully navigated the phase inherent to small companies, such as raising initial capital and managing early growth challenges. They are likely to sustain leadership, operate with a significant moat, and are not so large that their ability to grow fast is disparaging. This allows them to offer a sweet spot between fast-growing small businesses and well-established large companies.
Midcap stocks fall between large cap and small cap stocks and are determined by market capitalization. UTI Mid Cap Fund is an open ended equity scheme investing in midcap companies. It focuses on investing in companies with scalable business models and a long growth runway, as well as good companies whose businesses are going through a transitory phase of weakness or transformation. The Fund pursues a pure bottom-up stock selection approach to pick businesses with healthy financials and potential for sustenance of margins. It has a well-diversified portfolio of 78 stocks covering various sectors and industries.
The Fund came into existence on April 7, 2004 and has an AUM of over Rs. 7,729 crores with over 4.77 lakhs of unit holder accounts as of May 31, 2023. It is a true to label product and prefers to have an allocation in mid cap and small cap companies in the range of 85-90%. The top holdings consist of Cholamandalam Investment and Finance Co. Ltd., Federal Bank Ltd., Astral Ltd., Tube Investments of India Ltd., PI Industries Ltd., Shriram Finance Co. Ltd., Coforge Ltd., Polycab India Ltd., J K Cement Ltd., and Bharat Forge Ltd. The Fund aims to strike a balance between risk and reward by following a patient approach towards companies in the portfolio and with a strong Return on Capital Employed (RoCE) and Cash flow profile. This is likely to aid in mitigating sharp return divergence and volatility of the portfolio.
