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Should I switch from Edelweiss Mid Cap to Kotak Emerging Equity?

Ramalingam Kalirajan |8927 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Apr 11, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Apr 10, 2025Hindi

Hi I wanted a opinion of my portfolio So I have the following funds based on market cap diversification and Style diversification Nippon india small cap - For small cap exposure and good track record. It is focused on aggressive growth style of investing Parag parikh flexi cap - For good track record and it focuses on value style of investing which complements nippon growth style of investing Uti nifty 200 momentum 30 fund - invest in momentum style of investing I have Edelweiss mid cap in my portfolio and it is for mid cap exposure and it focuses on quality/growth style of investing. So I am also viewing kotak emerging equity fund which focuses on pure quality style of investing. So overlap of kotak emerging equity fund with momentum fund is 17% compared to Edelweiss mid cap with momentum which is 25. Also as I mentioned again it focuses on pure quality style of investing But already I have made many changes to my portfolio. So is Edelweiss that bad of a choice to switch to kotak or shall I stay with Edelweiss mid cap.

Ans: I’ll cover each aspect of your portfolio, your style mix, overlap concern, and guide you on whether switching from Edelweiss Mid Cap to Kotak Emerging Equity makes sense.

Let us evaluate this step by step, keeping it simple, professional, and actionable for you.

Portfolio Structure and Strategy
You have done solid homework on market cap and investment style diversification.

You have not overloaded one cap or style. That’s a good disciplined approach.

Small cap, mid cap, flexi cap and thematic fund – all bases are covered properly.

You have also mixed growth, value, momentum, and quality – this is smart thinking.

But, now the decision is not about fresh funds. It is about changing existing mid cap.

You are asking – is Edelweiss Mid Cap worth continuing or should I shift to Kotak?

Let us break this into focused sections for clarity and a full 360° evaluation.

Review of Mid Cap Exposure
Edelweiss Mid Cap is a growth and quality blend. It does not focus purely on quality.

Over long periods, it has performed reasonably, though not always top-ranked every year.

Its holdings may include a few cyclical stocks and aggressive bets occasionally.

But its volatility is within mid cap range and not unusually high.

Kotak Emerging Equity, on the other hand, is more strict about quality filters.

It avoids very cyclical names and avoids rapid sector rotation.

This helps during bear markets or sideways markets.

But during high growth cycles, Edelweiss may deliver higher upside.

So we need to assess from both – style complement and portfolio overlap.

Overlap with Momentum Fund
You already hold UTI Momentum 30 fund. It is based on past price action trends.

You rightly noticed Edelweiss Mid Cap has 25% overlap with Momentum Fund.

Kotak Emerging Equity has lower overlap – around 17%. This is a good sign.

Lower overlap helps you diversify style and sector risk better.

Momentum and growth styles tend to get crowded. Overlap here can increase risk.

Quality style helps reduce correlation and adds downside protection.

So on this angle alone, Kotak Emerging Equity scores higher than Edelweiss.

Complementing Other Funds
You already have a small cap fund focused on aggressive growth.

Your flexi cap (Parag Parikh) is value-driven and more conservative.

UTI Momentum is high beta and short-term trend oriented.

So a mid cap fund with strict quality filters complements well here.

It brings in predictability and consistency to an otherwise aggressive mix.

Edelweiss Mid Cap is not bad, but overlaps more in growth/momentum areas.

So it doesn’t add enough new style flavour compared to Kotak.

Recent Portfolio Changes
You mentioned making many changes recently. That’s a fair concern.

Too many switches cause taxation issues and disrupt compounding.

So only switch when benefits outweigh costs clearly.

This switch seems justified based on your diversification goal.

Don’t switch for 1-year or 3-year performance ranking.

Switch because the style fit improves and overlap reduces.

Also, don’t panic if performance doesn’t instantly change after switching.

Every fund will have its season. Patience is key in equity mutual funds.

Actively Managed Funds vs Index Funds
You have chosen actively managed funds. That is a very thoughtful move.

Index funds often copy past trends. They don’t adapt to new cycles fast.

Momentum crashes, sector bubbles, and frothy valuations hurt index funds deeply.

Active funds, with skilled fund managers, take defensive calls in time.

Active funds also invest in IPOs, off-index picks and tactical allocations.

Index funds miss such high alpha opportunities.

Active management, when done with discipline, beats passive over long term.

Your portfolio is well structured with a mix of active style-based funds.

That is far better than just buying index products and hoping for best.

Why Regular Plan via MFD with CFP is Better
Many investors go for direct mutual funds without expert guidance.

But without CFP guidance, they don’t know when to switch or stay put.

Regular plan via MFD with CFP ensures you have proper review and handholding.

Even 0.5% wrong allocation in volatile sectors can hurt long term goals.

Regular plan offers accountability, annual portfolio audits and emotional support.

During market crash, most direct investors panic and sell low.

With a CFP-guided MFD, that emotional mistake is avoided.

Saving 1% in expense ratio does not always give better result than having a coach.

Think of it as having a personal trainer in a gym. DIY may lead to poor posture.

So always invest through a certified mutual fund distributor with CFP expertise.

Final Insights
Edelweiss Mid Cap is not a bad fund. But overlap with momentum fund is high.

Kotak Emerging Equity has lower overlap and adds quality focus.

In your current portfolio, Kotak’s approach fits better as a mid cap choice.

You don’t need too many changes now, but this one is worth considering.

Make the switch only if investment is held for more than 1 year.

If held for less than 1 year, check tax impact due to STCG at 20%.

If more than 1 year, only gains above Rs 1.25 lakh will be taxed at 12.5%.

Reinvest only through a regular plan with a trusted CFP-guided MFD.

Don’t rush to change for small performance gaps. Focus on style balance and goals.

Continue your SIPs with patience. Review portfolio every year, not every quarter.

Stick with your goal-based strategy. That is the best way to build long-term wealth.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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