In this post, we discuss about large cap funds meaning, performance, risk and other advantages/disadvantages.
Large Cap Mutual Funds
While investing in equity, one lesson an investor has to learn is to diversify its investment. Return appetite, return expectation and future goals are some of the investment decisions one has to make before investing in equity. An investor has a wide variety of investment options and each of them has its own characteristics, advantages and disadvantages. It can be large cap, mid cap, small cap, multi-cap mutual funds with both dividend and growth options. Here we look at Large Cap Mutual Funds, their strategy and returns of some large cap mutual funds in the past.
Large Cap Mutual Funds Meaning
These are the funds which invest major corpus into the companies with large market capitalisation. There is no particular theory to decide as each fund house apply its own research and analysis and categorise stock under different categories. In general, companies with market capitalisation of Rs.1000 to 1500 crores or more are considered as large cap companies. The volatility of large cap funds is less as compared with mid and small cap funds. Large-cap funds also reflect the state of the economy. Due to stable nature of funds, the returns offered by large-cap funds are comparatively low than mid and small cap funds.
Why to invest in Large Cap Mutual Funds
The investment in large-cap funds implies that investment is made in top blue chip companies and as mentioned about it is considered as the stable investment. The stock of such blue chip companies is frequently tracked on different market indices. Mutual funds are meant for the long-term horizon and especially when you look at the returns offered by large-cap funds with the investment period of 10 to 15 years, it’s like more than 12% as cumulative returns.
The large-cap funds represent the current picture of the economy. The large size and scale of such companies will let such funds control any damages from the volatile market condition. It does represent the overall outlook of the economy. Since the investment is made in large companies the information about such companies are available on various public platforms and it can be easily accessed by any investor. This will make it easier for an investor to research and analyse about their investment and there can be aware of their future prospects. The BSE Sensex and NSE are constructed based on market capitalisation of top 30 and top 50 companies of India respectively.
Good long-term investment option
If someone wants to invest for a period of more than 10-15 years and have risk bearing capacity, wants to have steady returns, need to fulfil long-term financial returns like buying a home or something like that; the large-cap fund is the best option to invest in. It is ideal for the first-time investor or someone who does not have technical knowledge about the stock market yet wants to gain from market moments.
Though large-cap funds are one of the ideal investment options but those who love to take risk may not like to invest into large-cap funds. Also, it should be noted that large-cap fund is not a good option for those who is interested in generating income in short term than capital appreciation. The young generation who are in the 30s can opt for large-cap funds as it brings stability to the portfolio but will not generate returns in short term. Moreover, the returns generated by small and mid-cap funds are higher than large-cap funds. An investor will not have control over its investment and all the decisions are taken by the fund manager.
Large cap mutual funds in India
We wrote a fairly detailed post on Large Cap Mutual funds for SIP in 2017.
Here is the list as per CRISIL report for the top large cap funds as per performance for the year 2016.
|Large Cap-oriented Equity funds (Cluster ranks are arranged alphabetically)|
|Dec – 16 Rank||Mean Return||Volatility||Industry Concentration||Company Concentration||Liquidity|
|ICICI Prudential Top 100 Fund||1||1||2||1||4||3|
|Kotak Select Focus Fund||1||1||3||3||2||5|
|SBI Blue Chip Fund||1||1||1||1||1||5|
|Birla Sun Life Frontline Equity Fund||2||2||3||3||1||5|
|Birla Sun Life Top 100 Fund||2||2||3||3||2||3|
|DSP BlackRock Focus 25 Fund||2||2||4||4||4||3|
|HDFC Growth Fund||2||2||5||2||3||4|
|ICICI Prudential Focused Bluechip Equity Fund||2||2||3||3||3||4|
|ICICI Prudential Select Large Cap Fund||2||2||3||2||5||3|
|Motilal Oswal MOSt Focused 25 Fund||2||2||4||5||5||2|
|Franklin India Bluechip Fund||3||3||1||2||3||4|
|HDFC Top 200 Fund||3||3||5||4||3||4|
|HSBC Equity Fund||3||3||4||3||4||2|
|IDBI India Top 100 Equity Fund||3||4||2||3||1||2|
|Principal Large Cap Fund||3||3||3||2||3||2|
|Reliance Focused Large Cap Fund||3||3||5||2||4||3|
|Reliance Top 200 Fund||3||3||4||3||3||3|
|SBI Magnum Equity Fund||3||3||2||4||4||3|
|Tata Large Cap Fund||3||3||2||1||3||2|
|UTI India Lifestyle Fund||3||4||2||2||2||1|
|UTI Mastershare Unit Scheme||3||3||2||2||2||4|
|UTI Top 100 Fund||3||3||3||3||2||3|
|DSP BlackRock Top 100 Equity Fund||4||3||4||5||4||3|
|Edelweiss Equity Opportunities Fund||4||4||3||3||3||2|
|JM Equity Fund||4||4||2||3||3||2|
|L&T India Large Cap Fund||4||4||4||3||2||1|
|Sundaram Select Focus||4||5||1||4||4||1|
|UTI Bluechip Flexicap Fund||4||4||3||4||2||3|
|UTI Equity Fund||4||3||3||3||3||4|
|BNP Paribas Equity Fund||5||5||3||5||3||3|
|HDFC Large Cap Fund||5||5||4||4||5||3|
|UTI Opportunities Fund||5||4||3||4||3||4|
It is important to have large-cap funds in a portfolio to bring stability and long-term steady returns. Large-cap funds are for those who wants to take a moderate risk and balanced returns. Like any other investment options, large-cap funds also have its own advantage and disadvantages. It invests in large big size companies that have bearing on the economy. Now you have an idea about the factors to be considered before investing into large cap mutual funds. So take a wise decision.