Mid-cap stocks have been the darling of the stock market.

And if you have invested in a mid-cap funds, chances are you would have made some great money.

But, being volatile in nature, the Net Asset Value of these funds could drop by huge percentages if the stock market dips.

Here are a few funds that are most volatile.

• How to invest in a mutual fund

Funds that can melt away

We fished for diversified equity funds that invest huge amounts in small-cap and mid-cap stocks. The criteria we used was to look for such funds with a market capitalisation of less than Rs 1,000 crore (Rs 10 billion) as per September 2005.

Market capitalisation = number of shares of the company x current stock price.

We computed the weighted market capitalisation of each stock in the portfolio. So, if the fund had 20 stocks of company A, and the price of each stock was Rs 50, then the market capitalisation of that stock in the fund's portfolio would be Rs 1,000.

So we computed the market capitalisation of all the stocks in each mutual fund portfolio to arrive at the market capitalisation of the fund. 

Five funds emerged on our screen.

All have been top performers in the past few months. However, if the stock market falls, these funds will show an immediate drop in returns (at least in the short term).

If you have invested in any of these volatile funds, then don't panic as the volatile stock market goes through highs and lows.

If you are a potential investor, get ready for a bumpy ride.

• Cool funds for a hot market

- NAVs and returns are as on October 21, 2005.
- All data refers to the growth schemes. In such schemes, dividends are not distributed from the profits but are ploughed back into the scheme resulting in a higher NAV.
- Portfolio is as on September 30, 2005.

Canemerging Equities

NAV: 11.34
1-month return: -10.14%
3-month return: 7.18%
Return since launch: 13.40% (February 2005)
Percentage of large-cap stocks: 5.36%
Percentage of mid-cap stocks: 41.95%
Percentage of small-cap stocks: 49.22%

HSBC Midcap Equity

NAV:12.8829
1-month return: -7.81%
3-month return: 10.40%
Return since launch: 28.83 (May 2005)
Percentage of large-cap stocks: Nil
Percentage of mid-cap stocks: 68.19%
Percentage of small-cap stocks: 31.81%

Magnum Emerging Businesses

NAV: 21.03
1-month return: -7.04%
3-month return: 9.98%
Return since launch: 97.39% (September 2004) 
Percentage of large-cap stocks: 4.22%
Percentage of mid-cap stocks: 57.48%
Percentage of small-cap stocks: 36.82%

Pru ICICI [Get Quote] Emerging STAR

NAV: 16.73
1-month return: -10.05%
3-month return: 9.70%
Return since launch: 63.72% (October 2004)
Percentage of large-cap stocks: 1.5%
Percentage of mid-cap stocks: 42.97%
Percentage of small-cap stocks: 55.53%

Sahara Mid-Cap Fund

NAV: 13.2508
1-month return: -5.20%
3-month return: 11.91%
Return since launch: 32.51% (December 2004)
Percentage of large-cap stocks: 3.66%
Percentage of mid-cap stocks: 58.20%
Percentage of small-cap stocks: 34.84%