What are Large Cap funds?

  • Large-cap funds are those types of mutual funds that invest a huge proportion of their corpus in companies with great market capitalization.
  • Large Cap equity mutual funds are also known for their consistent returns over a period of time.
  • These companies are mostly leaders in their field of business and hence tend to remain stable than smaller or mid-cap companies when the market is unstable.
  • Large Cap companies tend to have good experience in the market.
  • They carry a strong performance record promoted by robust corporate governance practices.

Must Read: Market Capitalisation: large cap, mid cap, small cap India

How do Large-cap Equity Funds work?

  • Recently, SEBI’s categorization has changed the norms to examine whether a company is large-cap, mid-cap or small-cap mutual funds.
  • The companies that come within 100 ranks of the given benchmarks are called Large-cap companies.
  • When comparing to small-cap and mid-cap funds, large-cap funds are less risky and may be ideal for investors who are relatively risk-averse.
  • Being patient and having a long-term horizon is a preferable investment strategy for large-cap mutual funds.

Who should invest in Large-cap Equity Funds?

  • Large-cap equity funds invest in large firms. They seek to provide better capital over the long term and regularly distributing dividends fairly.
  • These funds are the path for those who need to take benefits of equity investment plans but do not want their returns to fluctuate more than the market. (i.e. Sensex or NIFTY).
  • This does not mean that these funds are resistant to any downturn, but are more likely to withstand a slowdown
  • They are even financially strong and are capable to face bear markets, though there’s a risk that the large-cap might underperform when compared to mid-cap or small-cap equity funds.
  • Therefore, the aim is to keep investing when the market is down to neutralize the effect of loss.
  • These funds depend on your investment horizon and risk/return aim. (an investment horizon of five to seven years is suggested).

Things to be Considered as an Investor

Risk

  • Large-cap equity funds are subject to market risk even though in a moderate way.
  • The NAV(Net Asset Value) doesn’t fluctuate on the accounts of the ups and downs of the benchmark, unlike small-cap/mid-cap funds.

Return

  • Do not expect these funds will perform inconsistently, as these have years of history indicating steady performance during market lows and market highs.
  • Do not feel yourself let down if these funds don’t post high returns even when the market is on the peak.

Cost

  • Large-cap equity funds charge a fee to control your money called an expense ratio.
  • It is a percentage of AUM(average assets under management) and returns the operating efficiency of the fund.
  • The upper limit is fixed to 2.5% by SEBI.
  • A fund with a lesser expense ratio and long-term holding period will help in recovering the money gone out by way of the underperformance.

Investment Horizon

  • These funds are suitable for a person who has a long-term investment horizon.
  • The fund suffers a lot of underperformance during the period of the market slump. However, it will average out in the long-run when the market is high. With an investment duration of around 7 years, it will give returns in the range of 10%-12%.
  • Those who choose these funds have to be prepared to stick at least for the said period to enable the fund to realize its potential.

Financial Goals

  • These types of mutual funds are ideal for an investor with a reasonable risk appetite.
  • These mutual funds are giving stable returns and check on the erosion of fund value in the time of the slump.
  • You may use these funds to accumulate wealth towards retirement planning.
  • New investors who look for exposure in the equity funds markets but are wary of the risks involved may build their portfolio around these funds.
  • With its ease of investing and favorable tax treatment, investors may look at these funds as ideal investments.

Tax on Gains

  • You earn capital gains when you redeem the units of large-cap equity funds. Capital gains are taxable in your hands. The rate of taxation depends on till how long you have stayed in invested equity mutual funds and it is called the holding period.
  • Capital gains earned on the mutual funds held for a period of less than 1 year are called short term capital gains(STCG). Short-term capital gains are taxed at a rate of 15%. capital gains made on mutual funds held for more than 1 year are called long-term capital gains (LTCG). After budget 2018, LTCG in excess of Rs 1 lakh will be taxed at 10% without the advantage of indexation.

Top 5 Large-cap Equity Funds in India

  • While choosing a fund, you should analyze the mutual fund performance from various angles.
  • There are different quantitative and qualitative parameters that can be used to arrive at the best large-cap equity saving fund as per your requirements.
  • In addition, you should keep your financial goals, risk appetite, and investment horizon in your mind every time.

The following table shows the top 5 large-cap equity funds in India based on the past 5 year returns. Investors can choose the funds based on various investment horizons like 1 year, 3 years or 10 years returns.

Fund Name1 year3 year5 year
ICICI Prudential Value Discovery Fund9.198.1921.64
Kotak Select Focus Fund Regular Plan11.9813.2821.59
Mirae Asset India Equity Fund16.0313.2121.24
Invesco India Growth Fund24.3912.9720.12
Franklin India Flexi Cap Fund13.639.0719.36

If you want to know the Best Performing Mutual Funds India. And want to make the best profits on your money, visit our website Wealthbucket. Let us guide you to reap the benefits Debt Mutual fundLarge Cap Mutual fund or Multi-Cap Mutual fund, to achieve your objectives.

Ring us at +91 8750005655. or shoot on our email at contact@wealthbucket.in.

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