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How good is the Tata Mid Cap Fund?

May 25, 2005

 Summary
  • Type
  • Open ended equity (diversified)
  • Benchmark
  • CNX Mid Cap 200
  • Min. Investment
  • Rs 5,000
  • Face Value
  • Rs 10
  • Entry Load
  • Waived off during IPO *
  • Exit Load
  • 2.00% (on exit within 6 months)
  • Issue Opens
  • May 19, 2005
  • Issue Closes
  • June 15, 2005
    * on investments <= Rs 500,000; post IPO load will be 2.25% (maximum) exit load will be nil

     Investment Objective

    To provide income distribution and/or medium to long-term capital gains by investing predominantly in equity/equity related instruments of mid-cap companies.

    InstrumentsNormal Allocation
    Mid cap stocks Min 65%
    Other stocksMax 35%
    Debt/Money Market Max 35%

     Is this fund for you?

    Tata Mid Cap Fund (TMF) offers a high risk - high return investment proposition. The fund seeks to invest predominantly in mid cap stocks to benefit from the long-term growth potential of these companies in the backdrop of a growing economy.

    For some time now, mid cap stocks/mutual funds have attracted much attention. Views of fund managers on the value these stocks/mutual funds can add to your portfolio is well-documented.

    The sustained (and as yet undisturbed) rally in the mid cap segment for over two years now, has added credence to this view. However, investors need to appreciate some traits closely associated with mid cap stocks before 'taking the plunge'

    Investors who appreciate the risks associated with mid cap stocks can add TMF to their mutual fund portfolios in their bid to clock above-average growth.

     Portfolio Strategy

    TMF has indicated that at any time it will invest at least 65% of its net assets in mid cap companies. Mid cap companies that are likely to find their way in TMF's portfolio are those that are either included in the CNX Mid Cap 200 index or ones that fall within market cap range of CNX Mid Cap 200.

    The fund can invest upto 35% of net assets in stocks beyond the mid cap variety defined above. This should allow for some diversification across market caps in the fund's portfolio. The fund also has a mandate to invest upto 35% of assets in debt/money market instruments.

    Equity funds from the Tata Mutual Fund stable are well-diversified. The net assets are spread across a larger number of stocks, which tends to lower the risk in times of market turbulence. If TMF is managed in the same style, then this must be viewed as a positive by investors.

     Fund Manager Profile

    M Venugopal is the General Manager - Investments. He is an MBA (Finance) and a science graduate. Venugopal has been associated with Tata Mutual Fund since July 1995. He also holds the position of Head-Research and is responsible for directing and co-coordinating all research activities.

    Before joining Tata Mutual Fund in 1995, he worked as an equity research analyst with a stock broker. He manages all other equity funds from Tata Mutual Fund.

     Outlook

    Given its portfolio strategy, at least 65% of TMF's net assets will be invested in mid cap stocks at all times. This will expose at least two-thirds of the fund's net asset to the above-average risks that are associated with such stocks.

    In such a scenario, the 35% that it can invest in stocks outside the mid cap universe (defined by it) and debt/money market will provide welcome relief. Over 3-5 years, the fund will benefit from the long-term growth potential of mid caps, but investors should factor in the above-average turbulence that will likely come their way.


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