HDFC Mid-Cap Direct Fund

An Overview- HDFC Mid-Cap Direct Fund

The fund managers aim to create a diversified portfolio picking mid-cap stocks that show reasonable growth prospects through sustainable business models, sound financial strength, and valuation, offering potential capital appreciation.

The HDFC Mid-Cap Direct Fund plan is suited for investors who are not averse to high-risk equity investments for higher yields in long time horizons, knowing the impact of market volatility. Although wealth creation is the primary aim of the investor, it is implied that the minimum tenure for staying invested should be three years and above.

By choosing to invest in the HDFC Mid-Cap Fund Direct plan, the investor has ensured that the returns are higher than the Regular plan due to the lower expense ratio. A glance through the top holdings in the portfolio is an indicator of the strategy adopted by the Fund Manager to achieve the Fund’s objectives.

Some of the top holdings in the portfolio expressed in the percentage to the NAV as of 31st May 2021 are Cholamandalam Investment and Finance (5.86), Balkrishna Industries Ltd. (5.76), Aarti Industries Ltd. (4.39), Sundaram Fasteners Ltd. (3.89), Max Financial Services Ltd. (3.16), to name a few. The top three equity holdings in the percentage of net assets as of 31 May 2021, showing industry allocation, are Auto Ancillaries (15.12), Finance (11.47), and Chemicals (10.82).

The plan options on offer for the HDFC Mid-Cap Direct Fund are:

1. Growth

   The sharable profits in the Fund are reinvested.

2. IDCW

   It is an acronym for Income Distribution and Capital Withdrawal, which essentially provides the option for reinvestment and payout of shareable profits as dividends.

HDFC Mid-Cap Direct Fund Facts

The table below shows some parameters that one should know in regards to the HDFC Mid-Cap Direct Fund:

What are the Benefits of HDFC Midcap Direct Fund?

The HDFC Mid-Cap Direct Fund predominantly restricts its investments to Mid-Cap companies with the potential to deliver sustained higher returns in the long term. Since the yields are dependent on the market fluctuations, the Fund is classified as high-risk. Naturally, investors choosing the HDFC Mid-Cap Direct Fund are willing to bear the risk to earn higher returns in the long time horizons, ideally exceeding three to four years. 

However, investors can look forward to the benefits of the Fund as a decisive factor to invest. Let us check out some of the critical benefits.

1. Convenience

   The investor has the flexibility to start with a minimum application amount of Rs 5000. Additional amounts are paid in multiples of Rs 1000. The SIP facility is convenient, with the frequency extending from daily to quarterly, starting from Rs 300. To top it all, the investor can purchase the HDFC Mid-Cap Direct Fund units at the distributor’s office or multiple intermediaries.

2. Transparency

   As per SEBI stipulations, the AMC must compute the NAV daily at the close of business and disclose the value in their portal along with AMFIs. The deadline for uploading the NAV in the stated public domain is 11 Pm on the business day. Additionally, the AMC transmits the NAV on SMS against specific requests. 

3. Liquidity

   The HDFC Mid-Cap Direct Fund is an open-ended scheme, meaning it can be freely redeemed or switched on the investor’s express request. The SEBI mandates the dispatch of the proceeds within ten business days, making the Fund fully liquid. However, SEBI has also stipulated 15% interest per annum for the delayed period by the AMC. 

4. Taxation

   The profit earned from the HDFC Mid-Cap Direct Fund is covered by the extant tax laws.  Earning on redemption is considered Capital Gains and Dividends as income. 

   Note: “Tax benefit is subject to changes in tax laws. Standard T&C apply.”

HDFC Mid-Cap Direct Fund Summary

Take a look below to understand the fund summary:

1. HDFC Mid-Cap Direct Fund-Growth Plan

   • Risk Level: high risk
   • NAV: Rs 86.7540 as of 18 June 2021 
   • Expense Ratio: 1.08 as of 31 May 2021
   • Fund Started On: 1 January 2013

Fund Returns Summary 

The table below shows the HDFC Mid-Cap Direct Fund-Growth Plan Option (as of 31 March 2021):

Returns greater than one year are compounded annualized (CAGR).

Returns since inception are calculated on Rs 18.799 allotment price

Benchmark is NIFTY Midcap 100 (TRI)

The Pros and Cons of HDFC Mid-Cap Direct Fund

The table below highlights the pros and cons of HDFC Mid-Cap Direct Fund briefly:

Who Should Invest in HDFC Midcap Direct Fund?

The HDFC Mid-Cap Fund Direct plan’s profile is high-risk as its investments are all in Mid-Cap equity and equity-related instruments, as the name suggests.  Such being the case, the investors aligned with a similar profile is ideally placed to purchase units in the scheme for wealth creation in the long term horizon. 

However, it is only staying invested for more than three years that can provide the desired yields after absorbing inflationary erosion to fulfill the financial goals. Accordingly, the indicative list of investors who should invest in the scheme is described below:

• Resident adults in single or joint accounts
• Minors but with an account operated by the parent and natural guardian, or the court-appointed legal guardian 
• The HUF Karta
• NRI or PIO individuals with the choice to open accounts those are either repatriable or non-repatriable
• Companies, Corporate Bodies, Public Sector Undertakings, and Enterprises
• Registered Association, Society, Religious and Charitable Trusts 
• Other HDFC MF schemes or other AMC schemes
• Financial Institutions and Banks 

Wrapping it Up

The HDFC Midcap Direct Fund eminently suits investors with a high-risk profile for its predominant investment in Mid-Cap stocks for a long-term capital appreciation. Liquidity is ensured by the Fund’s open-ended nature providing ready redemption and switch facility every business day. 

The investor can compute the redemption value using the applicable day’s NAV disclosed in compliance with SEBI guidelines. In fine, the scheme can create wealth in the long time horizon to help achieve life’s financial goals.

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