Will mid-cap funds be the flavour of 2008?

With each passing year, it is increasingly difficult to pin-point an asset class that will outperform. A common investor runs into a complex set of variables that need to be factored in while making an informed investment decision.

However, let us restrict ourselves to a relatively less complex opportunity of investing in domestic mutual funds schemes that could be the best option available which could out perform(of course equity based) in the year 2008.

The consensus of majority of analyst is that the domestic infrastructure spending would continue through 2008 and beyond.
The huge gap between what India needs and the existing infrastructure is enough to put conviction behind the theory that power, ports, roads, airports and along with these the equipment manufacturing companies would be clear beneficiaries.
Exchange rate sensitive sectors like IT and Textiles would continue to suffer.
Interest rate sensitive sectors like banking and real estate sectors are likely to out perform as interest rates have picked and are likely to come down from here.

Keeping in mind the above reasoning the mutual fund schemes one would expect to do reasonably well during 2008 include:
1. ICICI Prudential Infrastructure Fund, a thematic fund that benefit out of infrastructure themes, where five top sectors are oil and gas, power & transmission, steel, securities and banks.
2. Reliance Diversified Power Fund, a sector fund investing only in power and energy related companies.
3. Sundaram BNP Paribas Capex Opportunity Fund, which has a significant exposure to mid-cap plays and would benefit from capex spending.
4. Sundaram BNP Paribas select focus, a large cap play with focused approach to few selected companies.
5. SBI magnum Global fund, a mid-cap fund with higher exposure to housing and construction, metals, engineering, electrical equipment and software.

It must be noted that some of these schemes can be highly volatile due to their inherent portfolios.

Considering the valuations of some of the large caps and to sustain the pace of growth, I believe, make 2008 the year of mid-caps.
Don’t miss out on them
Happy mid-cap investing in 2008