Large Cap Mutual Funds

The best thing about investing in large cap mutual funds is the ability to grow with India’s most successful corporations without any of the volatility that keeps many investors tossing and turning. It’s because these are firms that have been tested and tried during several market cycles before, and such experience leads to steady fund performance.

• Market cycles and stability: Bigger firms usually have more robust balance sheets, and their income streams will be more diversified compared to small companies, meaning that they are better able to survive economic shocks
• Liquidity: Due to high liquidity in these securities, portfolio managers can buy and sell shares without affecting the price too much, while investors can withdraw their units without difficulty
• Dividend income: There is a history of many large cap companies distributing regular dividends to shareholders, which adds an extra income stream besides the growth in value.
• Less risky compared to other equities: Although there is risk involved in any equity security, large caps are positioned on the more conservative side of the equities scale and are good starting points for new investors.
• Professional management: The fund manager monitors these firms constantly and keeps changing the composition of the portfolio according to his studies and research, which a retail investor finds difficult to achieve.

Here's a quick look at five of the best large cap mutual funds in India worth knowing about.

Bandhan Large Cap Fund

Around since 2006, this fund has a comfortably long track record and a relatively small AUM of Rs.2,145 crores, which can make it easier to manoeuvre. Its 3-year return of 13.44% holds up well, though the 5-year figure of 11.03% is more modest.

ICICI Prudential Large Cap Fund

At Rs.80,960 crores, this is one of the biggest names in the category and consistently ranks among the top 3 large cap mutual funds in India by sheer scale, reflecting years of investor trust since its 2008 launch. Returns have stayed fairly steady, 12.58% over 3 years and 12.30% over 5 years, without sharp swings either way.

Invesco India Large Cap Fund

Launched in 2009 with a smaller AUM of Rs.1,931 crores, this fund posts the highest 3-year return on this list at 14.45%. Its 5-year number, 11.57%, is more middling, so it's worth checking year-by-year performance rather than the average alone.

Nippon India Large Cap Fund

With Rs.54,225 crores in assets since 2007, this fund's standout number is its 5-year return of 14.19%, making it one of the best large cap mutual funds India, with its 3-year figure sitting lower at 12.28%.

White Oak Large Cap Fund

The newest fund on this list, launched in December 2022, so there's no 5-year track record yet. Its since-inception return of 13.54% and Rs.1,259.74 crore AUM make it one to watch as it builds history.

It all comes down to the size of the companies and consequently their risk/reward potential. As per SEBI categorisation, the distinction is clear and straightforward, as it is all about the ranking of the company in terms of market capitalisation, regardless of what sector it operates in or its age.

Key Highlights

• Large cap stocks trade off upside potential for consistency, whereas small cap stocks do the opposite by providing greater upside potential at the expense of increased drawdowns.
• Mid cap stocks fall somewhere in between, providing growth prospects combined with some stability; hence, they serve as a compromise between two opposite types of assets.
• The optimal balance between the three types of stocks you need to consider is defined by your risk tolerance, investment period, and the place that equities play in your financial strategy, not by the past performance of the category.

Selecting a large-cap stock is not simply a matter of reviewing last year's performance and moving forward on that basis. There are certain structural elements that have been found to play a bigger role over time.

• Expense ratio: A fund that has a low expense ratio implies more of your money will be used to grow over time; therefore, you should compare funds on the expense ratio and not assume that all have equal prices.
• Fund manager track record: Look into the period during which the current fund manager has managed the scheme and its performance under their stewardship.
• Consistency over flashiness: A fund which has been consistently beating its benchmark through several market cycles is likely a better choice than a fund which had one stellar year and then lagged behind.
• Portfolio Concentration: Look at the number of stocks the fund invests in, and how concentrated their top stock positions are, because a highly concentrated portfolio might indicate high risk despite being a large cap fund.
• Personal investment timeframe: Large cap funds are good investments for those investors who are willing to wait; therefore, determine your own timeframe before investing in such funds. 

The large-cap funds are called "safe" by many investors, but they need to be considered more carefully. This is a stock investment, and thus your money can always be subject to market fluctuations, and there is never any assurance of large cap mutual funds returns.

• Market risk: Even the best-performing firms will experience declines in their share prices during market corrections, and this does not mean that large-cap funds are exempted from such risks, given they are top-performing firms.
• Volatile yet moderate: Although large caps are less volatile compared to mid caps or small caps, they can experience significant declines, especially amid global economic instability and sector-related problems.
• Low potential compared to small stocks: Since the firms are already big, the pace of their growth will also be more consistent but slow, making it very difficult for such mutual funds to post huge gains the way some small, rapidly growing firms do
• Concentration in a few sectors: Due to the composition of the largest 100 companies, the performance of a large cap fund depends significantly on a limited number of sectors, such as banking or technology.
• Lack of protection against the fund managers’ decisions: Despite regulation, the selection of stocks within the obligatory 80% may depend on the fund manager’s discretion, and not all large cap funds perform similarly.

Large-cap mutual funds will do well with those investors who want exposure in equities but are not interested in experiencing the wild swings associated with small-cap stocks. Simply said, the ultimate choice comes down to an individual investor’s preferences, time frame, and risk tolerance level.

• New equity investors looking to familiarise themselves with market-based securities before jumping into higher-risk securities.
• Risk-averse to moderate investors looking for equity-type returns without the high volatility of mid- or small cap stocks.
• Those with long-term goals, such as people saving for retirement or funding a kid's college education, because of the time span of 5 to 7 years, enabling them to reap the benefits of compounding.
• Investors creating an investment base, as big-cap mutual funds act as a solid core on which other, riskier investments can be made.
• Individuals who are developing an understanding of investing in equities because large-cap funds provide a less turbulent experience of how the market moves.

The large cap funds are equity mutual funds; therefore, they follow the same capital gains tax laws as other equity mutual funds, which is wholly dependent upon the time period of investment.

STCG - Short Term Capital Gain 

These gains are taxable at 20% if redeemed within 12 months of investing.

LTCG - Long Term Capital Gain

No tax on gains up to Rs.1.25 lakh in a financial year if held for more than 12 months; any amount in excess of Rs.1.25 lakh is taxable at 12.5%.

They are equally applicable to all equity mutual fund categories; hence, be it large cap, mid cap, or small cap, there will not be any difference in how each is taxed since what matters now is only the period you have held the investments and the gains realised.

The initial process is purely digital and does not require anything other than a couple of minutes after the documents are prepared.

• Compare and analyse large cap mutual funds at MySIPonline using our research tools, past returns, and risk indicators
• Make an account for free and get done with your one-time KYC digitally using your PAN, Aadhaar, and e-signature
• Pick the mode of investment, either SIP or lump sum, depending on your preferences
• Select your preferred mutual fund, add the investment amount and select the SIP date if you are investing monthly
• Pay for the investment through UPI, net banking or e-mandate, and your investment is active
• Monitor your performance and NAV growth at any time using the MySIPonline dashboard.