by Siddharth Singh Bhaisora
Published On May 7, 2024
Large cap mutual funds are equity funds that allocate a significant portion of their assets to companies with a large market capitalization. These are typically well-established companies known for their stability and consistent performance in generating wealth for investors over extended periods. Recognized for their robust track records, these companies often offer regular dividends and steady wealth compounding. In today’s article we will look at the best large cap mutual funds for investing in India 2024.
Large-cap mutual funds are investment schemes that primarily invest in the stocks of large-cap companies. In India, these companies are typically the top 100 firms in terms of market capitalization. Large-cap funds aim to offer stable returns and capital appreciation by investing in these well-established, financially sound companies.
According to the Securities and Exchange Board of India (SEBI) , large cap companies are defined as those that rank within the top 100 in terms of market capitalization. Investments in these companies are generally considered to carry lower risks and provide stable returns.
Historically, best large cap funds have delivered consistent returns over the long term. They are less likely to offer extraordinary returns like smaller companies but are considered safer investment options during market downturns.
Let’s look at the list of top large cap mutual funds in India for 2024:
Large Cap Fund | Crisil Rank | AuM (Cr) | 3 Year | 5 Year | 10 Year |
Baroda BNP Paribas Large Cap Fund | 4 | 1,863.39 | 20.8% | 19.5% | 17.5% |
Canara Robeco Bluechip Equity Fund | 3 | 12,577.55 | 17.2% | 19.0% | 16.5% |
Nippon India Large Cap Fund | 5 | 24,378.39 | 26.3% | 18.9% | 18.3% |
ICICI Prudential Bluechip Fund | 5 | 53,505.33 | 22.0% | 18.8% | 17.0% |
JM Large Cap Fund | 5 | 118.71 | 22.3% | 18.5% | 15.5% |
Edelweiss Large Cap Fund | 4 | 828.72 | 19.9% | 18.5% | 16.6% |
Invesco India Largecap Fund | 3 | 985.18 | 21.1% | 18.2% | 17.0% |
Kotak Bluechip Fund | 3 | 7,901.40 | 18.3% | 18.0% | 16.4% |
Mahindra Manulife Large Cap Fund | 3 | 421.6 | 17.9% | 17.6% | - |
Bandhan Large Cap Fund | 3 | 1,380.13 | 19.1% | 17.3% | 14.5% |
Data as of 07.05.2024
Top large cap mutual funds offer a prudent investment option for those looking for stability, lower risk, and reasonable returns over a long-term horizon.
As we step into the financial year 2025 (FY25), the Indian stock market is brimming with potential for further gains. Several factors contribute to this optimistic forecast, ranging from global economic shifts to local policy adjustments. Here’s an analysis of why the market looks promising and which sectors are expected to lead the growth.
Historically, Indian markets have shown a tendency to rise in anticipation of elections. The substantial net buying by foreign institutional investors (FIIs) in March, amounting to Rs 24,000 crore, and continuing into April, highlights strong positive sentiment. The Nifty and Nifty Smallcap indices ended FY24 above their 20-day moving averages, demonstrating robust technical momentum.
Signals from the U.S. Federal Reserve about possible rate cuts could lead the Reserve Bank of India (RBI) to adopt a similar stance. A softer monetary policy would likely increase market liquidity and foster a more favorable environment for equity investments.
The Finance Ministry’s optimistic outlook on inflation, with a noted downward trend in core inflation, points to easing price pressures across the board. Initiatives aimed at boosting summer crop yields are also expected to help keep food prices in check, further stabilizing inflation.
The expected inclusion of Indian bonds in Bloomberg's emerging market index by January 2025 is anticipated to attract foreign investments ranging between $3-4 billion in FY25. This will not only deepen the Indian bond market but also indirectly boost the equity market by improving investor sentiment.
Morgan Stanley's updated forecast of India’s GDP growth to 6.8% from 6.5%, coupled with the National Statistical Office’s adjustment to 7.6% from 7.3%, underscores a strong economic trajectory. India has maintained growth rates above 8% for three consecutive quarters, highlighting its robust industrial and capital expenditure activities which are vital for sustained market growth.
March 2024 saw a significant rebound in foreign portfolio investment (FPI) inflows, totaling Rs 38,098 crore. This marked a turnaround from previous selling trends and reflected a renewed interest in Indian equities, particularly in the context of the upcoming general election.
Given the broader economic and financial indicators, several sectors are poised for significant growth in FY25:
Technology: With global digital transformation trends, Indian IT companies are likely to continue their growth trajectory.
Pharmaceuticals: Ongoing innovations and exports in the healthcare sector place this industry in a strong position.
Renewable Energy: As India pushes for greener energy sources, companies in this sector could see heightened interest.
Infrastructure: Increased government spending on infrastructure, especially in transport and logistics, is expected to drive growth in this sector.
Financial Services: With improving market liquidity and stability, financial services, including banking and insurance, are likely to see robust growth.
Large cap funds invest in financially robust large organizations aiming to deliver regular dividends and long-term capital appreciation. They are particularly suited for risk-averse investors who still want to benefit from equity investments. Due to the strong financial footing of large cap companies, these funds are more resilient during market slowdowns. However, investors should remember that returns from large cap funds are generally lower than those from mid-cap or small-cap funds.
Risk and Return: While all equity funds are subject to market conditions that affect the Net Asset Value (NAV) , large cap funds tend to have less fluctuation in their NAV compared to mid-cap and small-cap funds. This attribute brings stability to an investment portfolio, albeit typically at lower returns than those potentially offered by smaller cap funds.
Suitability for Long-Term Investors: Large cap funds might underperform during market downturns, but the impact is often mitigated over time due to the financial strength of the underlying companies. These funds are recommended for investors who plan to stay invested for more than seven years, targeting annual returns of around 10-12%.
Financial Goals Alignment: These funds are particularly appealing for retirement planning due to their blend of risk and stable returns. They also serve as an entry point for investors looking to participate in equity markets with reduced risk exposure.
Stability: Large-cap companies are renowned for their stability and resilience, making them less volatile compared to mid-cap and small-cap stocks.
Dividend Yield: These companies often pay regular dividends, which can be beneficial for investors looking for passive income.
Growth Potential: While the growth rates of large-cap companies might be slower compared to emerging businesses, they still offer potential for steady capital appreciation.
Large cap mutual funds in 2024 are suitable for investors seeking long-term capital growth with moderate risk. They are ideal for conservative investors or those nearing retirement who prefer a stable investment avenue.
Lower Risk: Due to their established market presence and financial stability, large-cap stocks tend to be less risky.
Liquidity: Shares of large-cap companies are highly liquid, facilitating easier buying and selling without impacting the stock price significantly.
Diversification: Investing in large-cap funds can help diversify an investor's portfolio , potentially reducing risk and improving returns.
Investing in the best large cap mutual funds involves several risks, despite the general perception of stability associated with large companies. Understanding these risks is crucial for investors to make informed decisions.
Large-cap funds are subject to market risk, which arises from factors like geopolitical events and economic downturns. These external influences can affect the entire market, leading to poor performance of the stocks within the fund, irrespective of the companies' individual strengths.
Liquidity risk occurs when the fund manager faces difficulties in selling securities at desired prices due to a lack of buyers. This situation might force the fund to hold onto its investments longer than planned, potentially impacting returns and fund performance.
Changes in interest rates can inversely affect the price of securities. When interest rates rise, the prices of existing bonds and other fixed-income securities tend to fall, which can adversely affect the fund’s portfolio value. This risk is tied to broader economic conditions such as credit availability and market demand for securities.
These risks underscore the importance of a strategic approach to investing in top large cap mutual funds, emphasizing the need for a thorough understanding of market conditions.
Large-cap mutual funds, which invest in companies with large market capitalizations, are generally considered safer than their mid-cap and small-cap counterparts. However, risk management and mitigation are crucial to safeguard investments. Here is how the best large cap mutual funds manage risk:
One of the primary strategies for managing risk in large-cap funds is diversification. Although large-cap funds invest in big companies, it's essential to spread investments across various sectors to minimize sector-specific risks.
Large-cap funds typically invest in high-quality stocks with strong fundamentals. Managers of these funds rigorously analyze financial health, market position, and potential for sustained earnings to ensure they include only robust companies.
To manage risks effectively, fund managers regularly rebalance the portfolio. This involves adjusting the allocation of assets in response to market movements or changes in the companies' fundamentals to ensure the portfolio remains aligned with the investment objectives.
Investing in top large cap mutual funds can be a solid addition to your investment portfolio, especially if you're looking for stability and steady growth. Here are key points to consider before investing:
Large-cap funds are best suited for long-term investment. The potential for significant short-term gains is lower compared to small-cap or mid-cap funds, so patience is crucial.
Be aware of the expense ratio and any management fees associated with the fund. Higher fees can eat into your returns over time, so it's vital to choose funds that offer competitive rates without compromising on management quality.
While past performance is not a guarantee of future results, it does provide insight into how the fund has managed during different market conditions. Look for consistent performance rather than short-term highs.
The fund manager's experience and track record are critical. A fund managed by an experienced professional who has navigated through various market cycles is likely to perform better.
Understand the risk profile of the fund. Even though large-cap funds are less volatile, they are not free from risks. Market downturns can affect the fund's performance, although typically not as drastically as smaller cap funds.
Align your investment in large-cap funds with your financial goals. These funds are suitable for achieving long-term financial goals like retirement planning due to their potential for steady growth and lower volatility.
Before investing in large-cap mutual funds, consider these factors to make informed decisions that align with your financial objectives and risk tolerance.
Top large cap mutual funds are a cornerstone of a well-rounded investment portfolio, particularly for those who are risk-averse but still looking for growth. By investing in the biggest, most stable companies, these funds offer a balanced approach to capital appreciation and risk management in India's dynamic market environment.
What defines a company as 'large cap' in India?
In India, a company is classified as 'large-cap' if it ranks within the top 100 in terms of market capitalization. This ranking is generally maintained and updated by market regulators like SEBI (Securities and Exchange Board of India).
Why are large cap mutual funds considered safer investments?
Large-cap mutual funds invest in well-established companies with a history of stability and reliable performance. These companies are generally less volatile during market downturns, making large-cap funds a safer investment compared to funds focusing on smaller companies.
How do I start investing in large cap mutual funds in India?
To start investing in top large cap mutual funds in India, you can either approach a financial advisor or use online investment platforms. You'll need to complete a KYC (Know Your Customer) process, select a suitable large-cap fund, and then make your investment either as a lump sum or through a Systematic Investment Plan (SIP).
Can I invest in large cap mutual funds if I'm a beginner investor?
Yes, large-cap mutual funds are well-suited for beginner investors due to their lower risk profile compared to other equity funds. They provide a stable introduction to the stock market with a focus on companies that are leaders in their industries.
How often should I review my large-cap mutual fund investments?
It's advisable to review your large-cap mutual fund investments at least annually. This review can help you understand the fund’s performance compared to its benchmarks and sector averages, and make necessary adjustments based on your financial goals and market conditions.
Read these articles to understand all about mutual funds, SIPs and how you can invest in mutual funds with Wright Research:
The Crucial Role of Risk Profiling in Mutual Fund Investments
How many funds should you have in your Mutual Fund Portfolio?
What is Standard Deviation in Mutual Fund and How Does it Help in Portfolio Management?
Maximizing Portfolio Potential: The Role of an Investment Advisor
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