Best Large Cap Mutual Funds
About Large Cap Mutual Funds
Large cap mutual funds are equity funds that invest mainly in the top 100 companies of India. Being some of the most renowned organisations in India, the majority of the Indian population uses their products daily. Hence, such companies own a huge market share.
Furthermore, these funds invest most of their corpus in large cap companies. Businesses with a market cap of Rs. 20,000 crore or more are considered to be large-cap stocks.
How do Large Cap Mutual Funds work?
If you want to invest in large players in the Indian stock markets, you may consider investing in certain large-cap mutual funds that invest your money predominantly in the equity of large-cap companies. These companies have the distinction of being among the top-tier 100 companies in the Indian ecosystem of industries. You could say that these companies are famous for their growth and expansion potential and for their upstanding credibility over the years. These are the companies whose products and services are in use on a daily basis in the Indian diaspora.
Large-cap mutual funds work by investing your capital in the equity of large-cap companies with a market capitalisation of ₹20,000 crore or over. The aim of these mutual funds is to seek capital appreciation for investors with a long-term perspective of investment. Conservative investors may invest in such funds as they prompt investment for the long haul, aiming at the achievement of returns of large-cap companies that may tide over market volatility.
Features of Large Cap Mutual Funds
Investors should note that large cap funds are also susceptible to market risks. Hence, they must consider the factors that might impact their investments and returns. Factors such as the investor’s age, goals, associated risks, and investment horizons should be considered before concluding.
- Risk and Return: As all equities are affected by market fluctuations, so does the NAV (Net Asset Value). Although there are fluctuations, these movements may not be as considerable as with mid and small-cap funds. Hence, investing in the best large cap mutual funds can offer stability to your portfolio.
- Analysing the expense ratio of the scheme: The expense ratio refers to the fees charged by the large cap fund houses to manage the investments. Hence, as a best practice, it is better to look for fund houses with a lower expense ratio for maximised returns. But expense ratio should not be the only deciding factor.
- Long term investments: Despite being more stable, large cap mutual funds are also susceptible to market volatility, which may lead to underperformance at times. Hence, investors who are looking to invest for the short term may not find promising returns. Therefore, large cap mutual funds are well-suited for investors who look to invest for the long term.
- Considering financial goals: Despite being exposed to market risks, large cap funds also offer stable returns. Hence, this is one of the reasons why investors may often prefer it for their retirement plans. These funds can also be ideal for novice investors who want to gain market exposure without taking high risks.
- Long-term investment: Investors wishing to experience large-cap mutual funds’ full potential should ideally stay invested for 5-7 years. The long-term horizon balances out short-term underperformance and thereby ensures stable returns. Hence, large-cap funds are ideal for generating long-term wealth.
Advantages of Investing in Large Cap Mutual Funds
Some of the advantages of investing in large-cap funds include:
- Stability: Since large cap funds have a higher market share and are relatively less volatile, these firms offer more stability and a consistent income. All these factors make it a safer investment option. Besides, it can also give higher returns than short-term debt funds.
- High rate of liquidity: Large cap funds offer a high rate of liquidity in bear markets. In volatile markets, investors can easily liquidate their portfolios for minimised losses. Additionally, fund managers can maximise their returns by buying and selling stocks when required.
- Diversification: Besides the benefit of having options to invest in India’s leading companies, large cap funds are likely to withstand the market volatilities better than a mid or small cap fund. Thus, it could give your investment portfolio stability during market volatility. However, it is vital to note that diversification does not promise investment returns to eliminate the risks of loss.
- Capital appreciation and dividends: Given the above-mentioned factors, large-cap funds are more likely to offer benefits for an investment period of 5-7 years. In mutual funds, capital appreciation occurs when the value of your investment increases. Certain large cap funds may also offer regular dividends because of their consistent profit generation. Note that the dividends are added to your overall income and taxed as per the applicable slab rate. It is also subject to a 10% TDS in case it exceeds Rs. 5000 in a financial year.
Risks involved in Large Cap Mutual Funds
- Market Risks: Market risks indicate the underperformance of markets due to varied reasons. Despite being relatively stable, large-cap funds are susceptible to market risks.
- Investment costs: The investment costs associated with such funds include exit load and expense ratio. The expense ratio refers to the fees charged by the Asset Management Company (AMC), including operational and management fees. A lower expense ratio leads to higher profits.
- Concentration risks: Concentration risks occur when mutual fund investments rely heavily on a single sector. Whilst the fund can make significant gains when the sector thrives, it can lead to enormous losses when it diminishes.
- Interest rate risk: Interest rates fluctuate based on the availability and demand for credit. A high-interest rate may result in the values of the large cap funds moving in the opposite direction. The rise in interest rates leads to a rise in the cost of borrowing. This leads businesses and individuals to have less money to put in their portfolios. Further, this leaves less capital with the large cap funds to generate returns.
- Liquidity risk: Liquidity risk arises when the fund manager is unable to sell the underlying securities of the mutual funds due to a lack of buyers. This may refrain investors from liquidating their units when required.
Factors to Consider Before Investing in Large Cap Mutual Funds
Like any other equity-oriented mutual fund, there is always the probability of risk and returns in large-cap funds. You may believe that large caps may be potentially lucrative due to their possible consistent nature and potential long-term profile of investing, but some considerations must be taken into account:
- Think of charges like expense ratios that may eat into potential profits. When choosing large-cap funds, expense ratios may be high so it’s worth considering funds with low expense ratios, but those that offer the potential of high capital appreciation in the long term
- Reflect on the possible investment risks you may be taking when investing in large-cap funds. However reputed companies may be, there is always the possibility of adverse market conditions affecting any gains. Where the stock markets are concerned, nothing is cast in stone, so you must evaluate your own risk profile and review the equity that the fund is investing in.
- Related to the factor of risk, is your unique style of investment considering your individual financial plans and requirements. Large-cap funds may be considered by investors who have a long-term path of achieving returns paved out.
- Finally, you should think of the taxability of your returns, should you potentially gain any with investment in large-cap mutual funds. In case you do gain from your investment, you will be liable to pay tax on your capital gains.
Who Should Invest in Large Cap Mutual Funds?
Large cap mutual funds are usually fit for conservative equity investors. Here’s who can consider investing in large cap mutual funds:
- Those who wish to invest in India’s top companies: Companies like these are headed by proven market leaders and are highly successful business models. These are firms that have already established their trust in the industry. Hence, investing in a large cap fund makes you a partial owner of one of India’s top companies.
- Those who are looking for less volatility: The top large cap mutual funds usually invest in highly established organisations in different domains, which are more likely to withstand market volatility and challenging economic conditions. They have a solid supply chain, a significant market share, and a resilient business model. In case, if stocks from one sector show high vulnerability to market movements, the other sectors can cover up for its effects.
- Those looking for a solid core portfolio: Although large cap stocks may offer you lower returns compared to mid and small-cap stocks during short-term rallies, some of them have the potential to offer double-digit returns. Hence, the best large cap mutual funds can turn out to be a solid core portfolio.
Taxability of Large Cap Mutual Funds
Just as the other equity assets, large cap funds also receive a similar tax treatment. Profits earned through the holding period of less than a year are known as Short-Term Capital Gains (STCG). A tax of 15% is liable for this profit.
Profits earned through a holding period of more than a year are known as Long-Term Capital Gains (LTCG). As per the current tax rate, LTCG of up to Rs. 1 lakh in a financial year doesn’t attract taxes. If the gains exceed this limit, 10% taxes are charged without indexation advantage.
Dividends earned on [Name of the Category] funds are added to the investor’s taxable income and taxed at the rate as per the income tax slab. There is also a 10% TDS on dividend amounts exceeding Rs. 5000 in a financial year.
How to Invest in Large Cap Mutual Funds?
Investing in the large-cap Mutual Fund is hassle-free when done through your Angel One account. You just have to follow these simple steps:
Step 1:Log in to your Angel One account.
Note: In case you do not have an account with Angel One, you can open a demat account with us in under a few minutes by submitting the necessary documents.
Step 2:Determine a large-cap fund that suits your needs and risk profile. You can learn more about each large-cap fund on the Angel One app. Things to consider at this stage are:
- Search for the fund you want to invest in.
- Analyse the fund’s past performance, tax incidence, and the sectors and companies it invests in. You can also calculate the potential returns using the calculator.
- Evaluate the fund’s level of risk, its ratings and expense ratio.
Step 3:Once you finalise the large-cap fund(s) you want to invest in, open your Angel One account, go to the Mutual Funds section, and look for it.
- Decide whether you want to invest via SIP or make a one-time investment
- Decide your monthly SIP date. Now, enter the amount you want to invest and choose the payment mode.
- After placing the order, you can create an AutoPay to make hassle-free future instalments in case of SIP investments.
Top 5 Large Cap Mutual Funds
The following are the top Large-Cap Funds in India:
| Name of the Fund | AUM (₹ Cr) | CAGR 5Y | Expense Ratio | Alpha | Sharpe Ratio | CAGR 3Y |
| Nippon India Large Cap Fund | 35699.99 | 18.86 | 0.66 | 1.5 | 0.72 | 19.83 |
| ICICI Pru Bluechip Fund | 63264.3 | 18.17 | 0.91 | 1.38 | 0.69 | 16.47 |
| Canara Rob Bluechip Equity Fund | 14799 | 17.42 | 0.51 | 1.82 | 0.80 | 13.83 |
| Invesco India Largecap Fund | 1323.917 | 17.36 | 0.75 | 2.27 | 0.80 | 14.39 |
| JM Large Cap Fund | 480.4081 | 17.35 | 0.66 | -0.72 | 0.34 | 15.60 |
The above-mentioned funds are for informational purposes only and are not recommendations. The funds are ranked based on 5-year CAGR as of January 2025.
Nippon India Large Cap Fund
The Nippon India Large Cap Fund ranks 1st based on its 5-year CAGR of 18.86%. It has an AUM of ₹35,699.99 crore, which is the 2nd highest among the 5 funds, and an expense ratio of 0.66%.
The fund’s alpha is 1.50, indicating moderate outperformance compared to its benchmark, while its Sharpe ratio of 0.72 reflects balanced risk-adjusted returns. Its 3-year CAGR is 19.83%, which is the highest among the funds.
ICICI Pru Bluechip Fund
The ICICI Pru Bluechip Fund ranks 2nd with a 5-year CAGR of 18.17%. It has the highest AUM among the 5 funds, at ₹63,264.30 crore, and an expense ratio of 0.91%, which is the highest in this list.
The fund’s alpha is 1.38, and its Sharpe ratio is 0.69, reflecting moderate risk-adjusted returns. Over the past 3 years, the fund has delivered a CAGR of 16.47%, ranking 4th in 3-year performance.
Canara Rob Bluechip Equity Fund
The Canara Rob Bluechip Equity Fund ranks 3rd with a 5-year CAGR of 17.42%. It has an AUM of ₹14,799 crore and an expense ratio of 0.51%, which is the lowest among the 5 funds.
The fund’s alpha of 1.82 is the 2nd highest, while its Sharpe ratio of 0.80 is tied for the highest in the list. Its 3-year CAGR is 13.83%, the lowest among the funds.
Invesco India Largecap Fund
The Invesco India Largecap Fund ranks 4th with a 5-year CAGR of 17.36%. It has an AUM of ₹1,323.92 crore, which is the 2nd lowest among the funds, and an expense ratio of 0.75%.
The fund’s alpha of 2.27 is the highest among the 5 funds, while its Sharpe ratio of 0.80 is tied for the highest. Over the past 3 years, it has delivered a CAGR of 14.39%, ranking 3rd in 3-year performance.
JM Large Cap Fund
The JM Large Cap Fund ranks 5th with a 5-year CAGR of 17.35%. It has the lowest AUM among the 5 funds, at ₹480.41 crore, and an expense ratio of 0.66%.
The fund’s alpha is -0.72, the lowest in the list, reflecting underperformance compared to its benchmark. Its Sharpe ratio of 0.34 is also the lowest. Over the past 3 years, it has delivered a CAGR of 15.60%, ranking 2nd in 3-year performance.
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