HDFC Mid Cap Fund vs Motilal Oswal Mid Cap Fund: Which Offers a Better Risk-Reward Trade-off? – Money Insights News

They carry the ability to deliver higher growth than large cap funds while maintaining a balanced risk profile.

However, even within the category, funds can differ significantly in terms of investment style, portfolio strategy, risk profile, and return potential.

A key example of this is the two prominent schemes in the mid cap space, HDFC Mid Cap Fund and Motilal Oswal Mid Cap Fund. 

Both have delivered strong returns in the last five years, but through distinctly different investment strategies.

In this editorial, we compare the two funds across key parameters such as historical performance, risk-adjusted returns, and portfolio composition to understand how their approaches impact their outcomes.

#1 Historical Returns

On a five returns basis, Motilal Oswal Mid Cap Fund was the category topper, delivering returns at a CAGR of 23.4%. 

In comparison, the benchmark Nifty Midcap 150 – TRI index registered a growth of 18.9%.

The fund also outpaced the category average returns of 18.3%

HDFC Mid Cap Fund too stands among the category toppers during this period with a CAGR of 21.1%, though slightly behind Motilal Oswal Mid Cap Fund.

HDFC Mid Cap Fund vs Motilal Oswal Mid Cap Fund: Historical Returns

Source: ACE MF

#2 Risk Ratios

Over the last 3 years, Motilal Oswal Mid Cap Fund recorded a standard deviation of 19% (annualised), the highest in the category. 

HDFC Mid Cap Fund had a standard deviation of 14.6%, one of the lowest in the category.

This highlights that Motilal Oswal Mid Cap Fund’s higher returns came at a higher level of volatility, resulting in sharp swings in investments. 

In comparison, HDFC Mid Cap Fund’s relatively low standard deviation reflects lower fluctuation from its average annual returns and better consistency in performance.

In terms of risk-adjusted returns, as denoted by the Sharpe and Sortino ratios, HDFC Mid Cap Fund stands out.

HDFC Mid Cap Fund vs Motilal Oswal Mid Cap Fund: Historical Returns

Source: ACE MF

The Sharpe ratio measures the excess returns generated by a fund for each unit of risk it took. The Sortino ratio measures a fund’s ability to downside risk effectively.

HDFC Mid Cap Fund’s Sharpe ratio of 0.32 is currently one of the highest in the category. 

Motilal Oswal Mid Cap Fund’s Sharpe ratio of 0.21 is one of the lowest in the category and significantly trails the benchmark. 

Motilal Oswal Mid Cap Fund’s Sortino ratio too has been poor compared to the benchmark and most of its peers.

On the other hand, HDFC Mid Cap Fund’s Sortino ratio remains superior compared to the benchmark and majority of the peers in the category.

So while HFDC Mid Cap Fund generated better risk-adjusted returns, Motilal Oswal Mid Cap Fund struggled to reward investors adequately for the excess risk it took.

#3 Portfolio Concentration

Motilal Oswal Mid Cap Fund maintains a concentrated portfolio of around 30 stocks. The top 10 stocks in its portfolio form nearly 55% of its assets.

The fund holds many of its stocks with a short-term view, and has registered a high portfolio turnover of 90-160% in the last one year.

The limited number of stocks can help it create high alpha if the fund manager’s bets turn out to be successful but may result in high downside if the stocks do not pan out as expected.

Additionally, the higher portfolio churn can add to the fund’s volatility.

Motilal Oswal Mid Cap Fund – Top Stock Holding

Source: ACE MF

In contrast, HDFC Mid Cap Fund holds a diverse portfolio of around 75-80 stocks and has capped the allocation in each stock to under 5%. The top 10 stocks account for about 33% of its assets.

The fund follows a high conviction buy-and-hold approach holding most of its stocks with a long-term view. It carries a low turnover of 10-15%.

This strategy highlights the fund’s emphasis on risk management and steady returns rather than chasing high returns by taking high risk.

HDFC Mid Cap Fund – Top Stock Holding

Source: ACE MF

Conclusion

Overall, Motilal Oswal Mid Cap Fund follows a concentrated approach with high portfolio churn strategy that can potentially generate substantial alpha during favourable market conditions.

However, this may also mean higher downside risk and higher volatility, making it riskier than some of its peers.

Meanwhile, HDFC Mid Cap Fund follows a conservative approach focusing on stocks with long-term potential rather than following market momentum.

This approach may potentially translate into consistent returns that often surpasses benchmark at reasonable risk level.

This highlights that even schemes within a category can vary each other in terms of risk-reward and portfolio strategies.

Thus, investors should carefully evaluate schemes based on various parameters and choose the one 

#Table Note: Data as of 21 June 2026
Rolling period returns are calculated using the Direct Plan-Growth option.
Returns over 1 year are compounded annually. 

Standard Deviation indicates risk, while the Sharpe ratio and Sortino ratios measure risk-adjusted return.
They are calculated over 3 years, assuming a risk-free rate of 6% p.a.
Past performance is not an indicator of future returns.
The securities quoted are for illustration only and are not recommendations.

Happy investing.

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