What Are Midcap Funds? Meaning, Features and Benefits Explained

Midcap funds are among the most discussed investment options today — especially for investors who want higher growth potential than large-cap funds, but without taking the extreme risks of small caps. 

Let’s break it down in simple terms. 

What Is a Mid Cap Fund? 

A mid cap fund is an equity mutual fund (or market-linked fund) that invests primarily in mid-sized companies. 

In India, companies are classified based on market capitalisation: 

• Large-cap companies: Top 100 companies by market value 
• Midcap companies: Ranked 101 to 250 (or up to 300, depending on classification) 
• Small-cap companies: Beyond that 

So when someone asks, “what is midcap fund?”, the simple answer is: 

A midcap fund invests in medium-sized companies that are growing fast and have the potential to become future market leaders. 

These are businesses that have moved beyond the early-stage risk but still have significant room to expand. 

Mid Cap Fund Meaning in Simple Words 

If we simplify the midcap fund meaning, it is: 

An investment fund that focuses on companies in the middle stage of growth — not too big, not too small. Think of them as companies that have already proven their business model and are now scaling up aggressively. They are often called India’s emerging leaders. 

What Are Mid Cap Funds Known For? 

When investors look up “what are mid cap funds”, they’re usually trying to understand how they are different from other equity funds. 

Here are the defining features: 

1. Higher Growth Potential 

Midcap funds historically deliver higher long-term returns than large-cap funds because mid-sized companies grow faster than established giants. 

As companies expand, enter new markets, and improve profitability, their stock prices often reflect that growth. 

2. Moderate to High Risk 

Midcap funds are more volatile than large caps. Their prices may fluctuate more during market corrections. However, they are generally less risky than small-cap funds. This makes them suitable for investors who are comfortable with some market swings but want stronger growth potential. 

3. Exposure to Emerging Sectors 

Midcap companies often operate in high-growth sectors such as: 

• Financial services 
• Capital goods 
• Healthcare 
• Industrial manufacturing 
• Specialty chemicals 
• Digital services 

These sectors are closely linked to India’s long-term economic expansion. 

Key Features of Midcap Funds 

If you're researching midcap funds, here are the main features you should know: 

Invest in Mid-Sized Companies: Typically ranked between 101 and 250 (or 300) by market capitalisation. 

Long-Term Wealth Creation Focus: Best suited for 7–10+ year investment horizons. 

Professional Fund Management: Managed by experienced fund managers who select companies based on research and analysis. 

Diversification: Instead of investing in one company, your money is spread across multiple mid-sized businesses. 

Benefits of Investing in Mid Cap Funds 

Let’s now look at the real reason why investors search for mid cap funds — the benefits. 

1. Strong Long-Term Returns 

Midcap funds have historically outperformed large-cap funds over long periods. 

Many investors consider them when looking for growth-oriented portfolios. 

2. Opportunity to Invest in Future Leaders 

Today’s midcap company could become tomorrow’s large-cap giant. 

By investing early, you participate in that growth journey. 

3. Better Growth–Stability Balance 

Midcaps offer a balance between: 

• Stability of large caps 
• High growth of small caps 

That’s why they are often called the “sweet spot” of equity investing. 

4. Ideal for Goal-Based Investing 

Midcap funds are suitable for: 

• Retirement planning 
• Child education planning 
• Long-term wealth building 
• Creating generational wealth 

Who Should Invest in Midcap Funds? 

Midcap funds may be suitable if you: 

• Have a long-term investment horizon 
• Can tolerate short-term market volatility 
• Want higher return potential than large caps 
• Believe in India’s growth story 

They may not be ideal for conservative investors who prefer stability over growth. 

Investing in Midcap Funds Through ULIPs 

While midcap funds are commonly available as mutual funds, they can also be accessed through Unit Linked Insurance Plans (ULIPs). 

Investing in a midcap fund through a ULIP offers additional advantages: 

• Life insurance cover 
• Tax benefits under Section 80C (subject to limits) 
• Tax-free switching between funds (as per prevailing laws) 
• Long-term investing discipline due to lock-in 

For example, Bandhan Life’s ULIP products offer access to a dedicated Mid Cap Fund benchmarked to the Nifty Midcap 50 — combining growth potential with financial protection. 

This allows investors to participate in India’s emerging leaders while securing their family’s future. 

Final Thoughts 

So, what are mid cap funds? 

They are investment funds that focus on mid-sized companies with strong growth potential. 

Understanding the mid cap fund meaning helps you see why they sit at the intersection of ambition and scale — companies that are no longer small, but not yet industry giants. 

If you’re building a long-term portfolio and can stay invested through market cycles, midcap funds can be a powerful wealth creation tool. 

Because sometimes, the biggest opportunities lie right in the middle. 

FAQs  

1. What is mid cap fund? 

A mid cap fund is an equity fund that invests in mid-sized companies ranked between large-cap and small-cap companies based on market capitalisation. These companies are typically in the growth stage of their lifecycle. 

2. What is midcap fund meaning in simple terms? 

Midcap fund meaning simply refers to a fund that invests in medium-sized businesses that are expanding rapidly and have the potential to become future market leaders. 

3. What are mid cap funds suitable for? 

Mid cap funds are suitable for investors who: 

• Have a long-term investment horizon 
• Can tolerate moderate to high volatility 
• Want higher growth potential than large caps 

4. Are midcap funds high risk? 

Midcap funds carry higher risk than large-cap funds but lower risk than small-cap funds. They may experience sharp short-term fluctuations but offer strong long-term growth potential. 

5. What is the difference between large cap and mid cap funds? 

Large-cap funds invest in the top 100 companies by market capitalisation, offering stability. Mid cap funds invest in mid-sized companies, offering higher growth potential but more volatility. 

6. Can midcap funds help in long-term wealth creation? 

Yes. Midcap funds have historically delivered strong long-term returns and are often considered suitable for goals like retirement planning, children’s education, or wealth creation.