Introduction: The Battle of the Heavyweights
In the competitive landscape of mid-cap equity funds, two contenders stand out: ICICI Prudential Midcap Direct Plan Growth and Edelweiss Mid Cap Direct Plan Growth. Both funds aim to capitalize on the growth potential of mid-sized companies, but they do so with different strategies and performance outcomes. This blog post will provide a comprehensive comparison to help investors make informed decisions based on their specific financial goals.
Performance Breakdown: Returns vs Risk
When evaluating the performance of these two funds, we must consider both returns and risk metrics.
Rolling Returns
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ICICI Prudential Midcap has demonstrated impressive rolling returns over various periods:
- 6 months: -0.29%
- 1 year: 16.04%
- 3 years: 24.05%
- 5 years: 19.41%
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Edelweiss Mid Cap has shown:
- 6 months: -5.87%
- 1 year: 5.32%
- 3 years: 23.95%
- 5 years: 20.63%
Conclusion: ICICI Prudential has outperformed Edelweiss in both the 1-year and 6-month rolling returns, indicating stronger short-term performance.
Capital Protection During Market Crashes
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Max Drawdown:
- ICICI Prudential: -11.86% (1 year), -21.27% (3 years)
- Edelweiss: -12.81% (1 year), -20.06% (3 years)
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Recovery Days:
- ICICI Prudential: Data not available
- Edelweiss: 313 days (3 years)
Conclusion: While both funds exhibit significant drawdowns, ICICI Prudential has a slightly better max drawdown in the 1-year period. However, the absence of recovery days data for ICICI Prudential makes it difficult to fully assess its capital protection capabilities.
Risk-Adjusted Performance
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Sharpe Ratio:
- ICICI Prudential: 0.9599
- Edelweiss: 0.9804
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Sortino Ratio:
- ICICI Prudential: 1.2385
- Edelweiss: 1.1688
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Alpha:
- ICICI Prudential: 3.6414
- Edelweiss: 3.8801
Conclusion: Edelweiss has a higher Sharpe Ratio, indicating better returns per unit of risk. However, ICICI Prudential's superior Sortino Ratio suggests it offers better downside risk protection. In terms of Alpha, Edelweiss slightly edges out ICICI Prudential, indicating a marginally better outperformance against its benchmark.
Portfolio Overlap & Sector Bets
Both funds have a notable overlap of 26.72% in their holdings, which includes companies like Multi Commodity Exchange Of India Ltd. and APL Apollo Tubes Ltd. However, their sector allocations differ significantly:
Top 5 Sectors
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ICICI Prudential:
- Metals & Mining: 18.68%
- Capital Goods: 13.77%
- Services: 12.88%
- Chemicals: 12.28%
- Financial: 10.04%
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Edelweiss:
- Financial: 24.22%
- Capital Goods: 10.15%
- Services: 9.83%
- Automobile: 9.37%
- Healthcare: 8.33%
Conclusion: ICICI Prudential's heavy allocation in Metals & Mining has likely contributed to its stronger recent performance, especially in a recovering economy. In contrast, Edelweiss's focus on Financials may have limited its short-term returns, particularly in a volatile market.
The Final Verdict: Which Should You Buy?
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ICICI Prudential Midcap Direct Plan Growth is better suited for aggressive investors looking for strong short-term performance and capital protection during market downturns. Its higher rolling returns and better Sortino Ratio make it an attractive option for those willing to accept higher volatility.
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Edelweiss Mid Cap Direct Plan Growth, with its slightly better Sharpe Ratio and Alpha, is ideal for long-term investors who prioritize risk-adjusted returns and are comfortable with a more conservative approach. Its lower expense ratio also makes it a cost-effective choice for investors focused on long-term growth.
In conclusion, both funds have their strengths and weaknesses, and the choice ultimately depends on your investment strategy and risk tolerance.