Mirae Asset's Ankit Jain advocates patience for mid-cap fund investors despite short-term valuation challenges

Ankit Jain, the Fund Manager at Mirae Asset Investment Managers, on Thursday, September 21, expressed positive long-term perspective on mid-cap funds, while simultaneously cautioning against their expensive valuations in the short term. He highlighted that midcap valuations on a one-year forward basis currently stand at approximately 23 times earnings, which represents an expensive valuation compared to historical levels of 16-17 times earnings.

However, Jain pointed out that the earnings growth outlook for mid-cap companies remains promising, potentially supporting these premium valuations over time.

Jain recommended a preference for large-cap investments in the near term due to the margin of safety they offer. However, he emphasised that over a five-year horizon, mid-cap funds present greater potential for earnings growth. He maintained a positive stance with this timeframe in mind.

Despite a recent correction in the market, the mid-cap index has experienced substantial year-to-date growth, surging by nearly 30 percent. This performance has attracted consistent inflows into mid-cap mutual funds.

August's mutual fund data revealed a significant increase in inflows into mid-cap funds, totaling Rs 2,512 crore, compared to the previous month's inflow of Rs 1,623 crore, indicating a growing investor confidence in medium-sized companies.

Jain also highlighted specific sectors, including financials, pharmaceuticals, and consumer discretionary, which continue to offer a margin of safety and exhibit clear earnings growth potential.

On Thursday, September 21, the Nifty 50 index experienced a decline of over 159 points, closing at 19,742, marking its lowest close since September 7. Concurrently, the BSE Sensex fell by 571 points to 66,230, reflecting the prevailing market conditions.