Buying the best of the best of anything be it bags or shoes is not in everyone’s budget. Similarly, investing in the stocks of the top companies, known as large cap stocks is not possible for every investor with the high pricing of only a single share. With large cap mutual funds, it’s no more difficult to add these stocks to your portfolio. Curious to kn ow more? So, let’s understand what is large cap fund, its benefits, and some of the top returns-generating funds.
What are Large Cap Mutual Funds?
Large cap funds are associated with the family of equity mutual funds. The main investing rule is that these funds have to put at least 80% of their collected corpus in large cap stocks. These stocks are well-established names in the market and they are ranked in 100 top companies based on the market capitalization. The market cap of these companies is around ₹20,000 crores or more.
The fund manager selects the top stocks and invests the collected money into these stocks. The 80% has to be invested in large cap stocks, while the rest depends on the fund manager’s choice.
Why Invest in Large Cap Mutual Funds
Diversification with Expertise
The key benefit is that with a single unit of a fund, you get a bundle of top large cap stocks. This means the dual advantage of diversification along with professional expertise.
Alternative to Large Cap Stocks
Large cap funds are suitable for investors who want to invest in large cap stocks but don’t have a huge amount of money to buy the stocks. These funds comparatively have a lower cost and a small or retail investor can also invest in them.
Less Risky than Mid-Cap or Small-Cap Funds
The large cap companies have been in existence for a long time and hold the dominant position in the market. They have a strong business model and the ability to handle market downturns efficiently. Also, their strong financial position is highlighted in their ability to consistently generate good profits. Hence, these funds are less risky as compared to the funds that invest in mid-cap or small-cap stocks.
Good for Long Term Objectives
With the backing of stocks that can strongly stand in the long term and are less volatile, large cap funds are good to invest for long-term objectives such as a child’s education, retirement life, etc.
Low Cost Large Cap Index Fund
Apart from the active-style large cap mutual funds, you can also invest in large cap index funds which are passive in nature. These types of index funds just track the stocks of Nifty 50 or Sensex leading to lower management fees of a fund manager and hence the overall cost of the fund gets much lower.
Regular Dividend Income
The large cap stocks also announce regular dividends for their shareholders. The large cap mutual funds which also have a part of ownership in these companies get a dividend income and this helps the funds to generate higher returns.
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- 20 Lac+ unique clients
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Top 10 Large Cap Mutual Funds for the Long Term
Here is the list of the best large cap mutual fund which have given competitive returns in the last 5 years.
| 5 Year Returns (%) | Expense Ratio (%) | |||||||
| Fund Name | Benchmark | Daily AUM (in ₹ crores) | Benchmark | Category Avg | Fund | Category Avg | Fund | Risk Level |
| Nippon India Large Cap Fund | BSE 100 Total Return Index | 32,924.41 | 20.67 | 19.36 | 23.14 | 2.01 | 1.58 | Very High |
| ICICI Prudential Bluechip Fund | NIFTY 100 Total Return Index | 64,282.84 | 20.00 | 19.36 | 22.14 | 2.01 | 1.45 | Very High |
| Canara Robeco Bluechip Equity Fund | BSE 100 Total Return Index | 14,878.46 | 20.67 | 19.36 | 20.93 | 2.01 | 1.66 | Very High |
| Kotak Bluechip Fund | NIFTY 100 Total Return Index | 9,471.73 | 20.00 | 19.36 | 20.61 | 2.01 | 1.74 | Very High |
| HDFC Top 100 Fund | NIFTY 100 Total Return Index | 37,745.80 | 20.00 | 19.36 | 20.36 | 2.01 | 1.6 | Very High |
| Baroda BNP Paribas Large Cap Fund | NIFTY 100 Total Return Index | 2,342.12 | 20.00 | 19.36 | 20.92 | 2.01 | 2.03 | Very High |
| JM Large Cap Fund | BSE 100 Total Return Index | 392.61 | 20.67 | 19.36 | 20.51 | 2.01 | 2.41 | Very High |
| Invesco India Largecap Fund | NIFTY 100 Total Return Index | 1,234.23 | 20.00 | 19.36 | 20.32 | 2.01 | 2.1 | Very High |
| Bandhan Large Cap Fund | BSE 100 Total Return Index | 1,686.73 | 20.67 | 19.36 | 20.30 | 2.01 | 2.07 | Very High |
| Edelweiss Large Cap Fund | NIFTY 100 Total Return Index | 1,079.19 | 20.00 | 19.36 | 20.10 | 2.01 | 2.19 | Very High |
*Data as on September 2, 2024
These 5 Best Mutual Funds have delivered great returns and their expense ratio is also lowest amongst their peers.
1. Nippon India Large Cap Fund
This is one of the top large cap mutual funds that was started on August 8, 2007, and has a current NAV of ₹89.9005. Jensen’s Alpha (a measure of returns) is 5.16 which is higher than the category average of -0.15, while the beta (a measure of volatility) is 0.99 which is slightly higher than the 0.95.
The fund has invested 82.16% into large cap stocks with the highest exposure to the financial sector. The top 3 stock allocations of this fund are HDFC Bank, Reliance Industries, and ITC.
2. ICICI Prudential Bluechip Fund
The current NAV is ₹110.0300 and it was started on May 23, 2008. Jensen’s Alpha is 4.26 and beta is 0.88 which means better returns with lower volatility.
With the highest exposure to the financial sector, this fund has invested 82.32% into large cap stocks. The top 3 stock holdings are ICICI Bank, Reliance Industries, and Larsen & Toubro.
3. Canara Robeco Bluechip Equity Fund
The current NAV is ₹62.7000 and the fund was started on August 20, 2010. Jensen’s Alpha is -1.41 and the beta is 0.93 highlighting that the fund has given lower risk-adjusted returns in this category but has lower volatility.
The portfolio allocation towards the large cap stocks is 88.7% with majorly in the financial sector. The top 3 stock allocations of this fund are ICICI Bank, HDFC Bank, and Reliance Industries.
4. Kotak Bluechip Fund
This fund was launched on February 6, 2003, and its current NAV is ₹575.2850. Jensen’s Alpha is 0.07 and beta is 0.94 meaning that it has both the benefits of higher returns and lower volatility.
The portfolio allocation towards the large cap stocks is 83.94% with the major investment to financial sector stocks. The top 3 stock holdings are HDFC Bank, ICICI Bank, and Reliance Industries.
5. HDFC Top 100 Fund
The current NAV is ₹1,174.0390, and it was started on October 11, 1996. Jensen’s Alpha is 3.87 and beta is 0.94. Hence, the fund has generated better returns and also with lower volatility.
The fund has invested 96.45% of its assets into large cap stocks with the financial sector’s highest exposure. The top 3 stock allocations of this fund are ICICI Bank, HDFC Bank, and NTPC.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
Conclusion
Large cap funds, the type of equity mutual funds, invest the majority of their assets in large cap stocks. There are multiple reasons for you to invest in these funds such as professional expertise, exposure to financially sound and strong companies, budget-friendly, and the suitability to invest for long-term objectives.
FAQs
Is large cap a good investment?
Large cap mutual fund is a good investment for those who want to invest in large cap stocks but don’t have the expertise to select the right stocks and a large sum of money to invest in them.
What is the tax on large cap mutual funds?
Earlier, the STCG of a fund with a holding period of more than 12 months was taxed at 15% and LTCG was taxed at 10%. Now, with the amendment of Budget 2024, the STCG is taxed at 20% and LTCG at 12.5%. The exemption limit of the LTCG tax has also been raised from ₹1 lakh to ₹1.25 lakhs.
What are the disadvantages of large cap funds?
The large cap funds invest in stocks that are already well-established and hence the chances of growth are very low. So, there are fewer possibilities that these funds can generate above-normal returns.
What is the difference between large and mid-cap funds?
Large cap funds invest in the top 100 companies while the mid-cap funds invest in the companies ranked between 101 and 250 based on market capitalization. Large cap funds can be less risky than mid-cap funds but have a lower potential to grow sharply.
References:
https://www.livemint.com/money/personal-finance/what-are-large-cap-mutual-funds-151640183259069.html
https://www.mutualfundssahihai.com/en/why-you-should-consider-investing-large-cap-funds
https://www.moneycontrol.com/mutual-funds/performance-tracker/returns/large-cap-fund.html
Author: All Content is verified by SMC Global Securities.
WHY SMC
- 20 Lac+ unique clients
- 33+ Years of Serving
- Advance Technical Analysis
- Free Demat Account
