Large Cap Funds

What are Large Cap Funds?

Large-cap Fund is a good starting point in mutual fund investment, which has a lower risk but can generate higher returns. If you are new to the arena of investments, you might find it intimidating to choose suitable equity funds for you.

Large-cap funds are equity funds that invest a large proportion of the corpus under blue-chip companies with a large market capitalization or size like Reliance, TCS, ITC, etc. These companies are leaders in their fields and have a stellar reputation and a consistent track record of high profits on investment (in extended periods).

Who Should Invest in Large Cap Funds?

Mutual funds are categorized as large-cap funds, mid-cap funds, and low-cap funds according to the market capitalization of companies. Large-cap funds invest most assets in top-notch companies with stable growth and are not severely affected by market changes. As a result, large-cap funds offer steady returns, good capital appreciation in the long run, and regular dividends.

  • Therefore, it is the ideal investment avenue for risk-averse people or people who do not want their returns to fluctuate significantly, like investors new to equity funds.
  • A large-cap fund is also ideal for people willing to invest their assets for a long-term window, like people planning investments for their retirement.
  • However, it is also essential to keep in mind that large-cap fund returns are low. So only invest in these if you want stable compounding of assets at minimal risks.
  • Since large-cap fund returns are comparatively lower than other mutual funds, it is best to hold them for a minimum of 3 to 5 years. Thus, large-cap funds are best for people who have surplus cash with them.
  • Large-cap funds are also a good investment option for people who want to take advantage of market fluctuations but do not wish to engage in high-risk investment options.
  • It is also critical to keep in mind that a tax of 15% is levied on your capital gains from large-cap funds if you hold your funds for less than a year. Hence, it is not a good option for people with short-term investment goals.

Features of Large Cap Funds

Expense Ratio

Fund houses charge a fee to supervise your investments in large-cap mutual funds. This fee is called the expense ratio; it amounts to a certain proportion of the fund’s total assets. SEBI has capped this expense ratio to 2.5%, meaning no company can charge more than that to manage your investment portfolio. However, it is wise to research and look for a scheme that offers a lower expense ratio to have maximum returns.

Investment Period

Large-cap funds invest in top-tier companies which are already at their highest potential; hence the growth of the companies is not exponential but relatively slow and steady. Coupled with this, these funds are liable to market changes, although any slump in return is made up in the long run since blue-chip companies are financially stable and can seldom crash down completely. Hence, these funds are meant to maximize returns for a longer time horizon.

Taxability of Large Cap Funds

Dividend Distribution Tax

Large-cap funds are subject to Dividend Distribution Tax like any other equity fund. Fund houses deduct a 10% DDT when paying the fund’s dividends.

Capital Gains Tax

When you dissolve your funds, tax is deducted on the capital gains. However, the tax percentage is determined by the holding period.

  • If you dissolve your funds within one year, the capital gains are taxable under Short Term Capital Gain at 15%.
  • However, the capital gain is taxed under Long Term Capital Gain for a holding period longer than one year. The capital gain is tax-free up to 1 lakh, beyond which it is taxed at the rate of 10% without any indexation benefits.

It is best to conduct thorough research before investing in large-cap funds because even the best large-cap funds are subject to market volatility and the taxability of these funds is moderately high.

Risk Involved With Large Cap Funds

  • Like any other equity mutual fund, market changes affect large-cap funds. However, these risks are relatively low.
  • The Net Asset Value (NAV) of a large-cap mutual fund does not fluctuate much, compared to small-cap or mid-cap funds, even in economic recessions since blue-chip companies are financially stable. Hence, these funds lend your investment portfolio the needed stability.
  • Moreover, these top-tier companies belong to the range of top 100 companies based on market capitalization, have a stable administration, sustainable business practices, and exhibit substantial growth yearly. Hence, there is a significantly low chance of your investment getting corroded. Of course, there is always the risk of returns dipping during a lower market performance (during the bear phase), but they are recovered in the long run.
  • It is imperative to keep in mind that although large-cap funds offer low risks, in terms of returns, they are not too high or profitable as compared to mid-cap and small-cap funds. However, unlike other mutual funds, large-cap funds are built to handle the stock market’s volatility, and hence they are low-risk investments. It is essential to reiterate that all investments come with a certain risk.

 Advantages of Large Cap Funds

  • Large-cap ventures have steady revenue generation with sound business plans. Hence, the chances of your large-cap funds plummeting are slim. These funds offer stability to your investment profile.
  • The stock prices of blue-chip companies do not fluctuate significantly. Thus, such companies offer better capital appreciation to their investors.
  • Top-tier companies can endure market turbulence (bear market). Therefore, large-cap funds can sustain even in times of recessions.
  • Large-cap funds also offer good liquidity, which helps you manage your investment portfolio without causing significant loss even during adverse market conditions.
  • Large-cap ventures are well-known companies that publish clear business goals and financial statements every year. Therefore, it is easy for investors to study its data and decide if it is a good fit.
  • People new to the domain of investments with a low-risk appetite and without much knowledge of market performance can benefit by investing in large-cap funds (top-tier companies).

In a nutshell, investment is subjective. We have discussed large-cap funds in detail to illustrate the risks and benefits. Risk and returns are two scales of investment. Pick your equity mutual fund depending on the parameter that tips your scale.

Who Are These Funds Suited For?

Large-cap funds invest mainly in companies with high-end market capitalization greater than Rs. 20,000 crores. These funds are equity funds that invest in big organizations known to generate stable returns and rule the market. Investors looking for an average risk factor, better exposure to equities, and a portfolio that is well-protected from the bearish markets, must invest in large-cap funds. These funds also go through heavy market fluctuations, so investors must consider the risk factor and investment objective before indulging in these schemes.

Large Cap Funds bring much-needed stability to tailor your investment funds accordingly. Large-cap funds may not promise the market’s return expectations, unlike mid- or small-cap stocks; however, they provide a lower level of risk than other types of equity funds.

Best Large Cap Funds

Canara Robeco Bluechip Equity Fund Direct-Growth

  • Canara Robeco Bluechip Equity Fund Direct-Growth has assets under management (AUM) of Rs. 7,593.28 Cr as of 12/08/2022 and is a very high-risk, large cap equity fund. Most of the fund’s assets are invested in the financial, technology, energy, consumer staples, and sectors. The fund’s top five holdings are Reliance Industries Ltd., ICICI Bank Ltd., HDFC Bank Ltd., Infosys Ltd. Technology, and State Bank of India. Its NAV as on 12 Aug 2022 is Rs 45.89. The expense ratio for Axis mid-cap fund is 0.39% (Inclusive of GST). The fund has an exit load of 1% and will be charged for redemption within 12 months.
  • Minimum Investment Amount: Rs. 5,000 via SIP. 1,000.
  • Fund Performance: Axis Midcap Direct Plan’s 1-year growth returns are 1.33%. It has earned 18.54% average yearly returns since its inception. The Canara Robeco Bluechip Equity Fund’s 3-year growth returns are 20.8% and 5-year growth returns are 15.72%. Its fund managers are Vishal Mishra (Jun 2021 – Present) and Shridatta Bhandwaldar (Jul 2016 – Present)

Kotak Bluechip Fund Direct-Growth

  • Kotak Bluechip Fund Direct-Growth has assets under management (AUM) of Rs. 4,703.22 Cr as of 12/08/2022 and is a very high-risk, large cap equity fund. Most of the fund’s assets are invested in the energy, financial, technology, automobile, and construction sectors. The fund’s top five holdings are Reliance Industries Ltd., ICICI Bank Ltd., HDFC Bank Ltd., Infosys Ltd., and Maruti Suzuki India Ltd.. Its NAV as on 11 Aug 2022 is Rs. 418.15. The expense ratio for Kotak Bluechip Fund Direct-Growth is 0.78% (Inclusive of GST). The fund has an exit load for units over 10% of the investment; 1% will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 1,000 and via SIP is Rs. 100.
  • Fund Performance: The Kotak Bluechip Fund has given 3-year growth returns of 20.11% and 5-year growth returns of 14.2%. Fund management – Harish Krishnan – Jan 2014 – Present, Arjun Khanna – Mar 2022 – Present

ICICI Prudential Bluechip Fund Direct-Growth

  • The ICICI Prudential Bluechip Fund has assets under management (AUM) of Rs. 32,524.62 Cr as of 12/08/2022 and is a very high-risk, large-cap, equity fund. Most of the fund’s assets are invested in the financial, technology, energy, construction, and communication sectors. ICICI Bank Ltd., Infosys Ltd., HDFC Bank Ltd., and Larsen & Toubro Ltd. are the fund’s top five holdings. Its NAV as on 11 Aug 2022 is Rs. 72.15. The expense ratio for The ICICI Prudential Bluechip Fund is 1.07% (Inclusive of GST). The fund has an exit load of 1% and will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 100 and via SIP is Rs. 100.
  • The ICICI Prudential Bluechip Fund has given 3-year growth returns of 18.67% and 5-year growth returns of 13.61%. Fund management – Priyanka Khandelwal – Jun 2017 – Present, Anish Tawakley – Sep 2018 – Present, Vaibhav Dusad – Jan 2021 – Present

Invesco India Largecap Fund Direct-Growth

  • Invesco India Largecap Fund Direct-Growth has assets under management (AUM) of Rs. 684.35 Cr as of 12/08/2022 and is a very high-risk, large-cap, equity fund. Most of the fund’s assets are invested in the energy, financial, technology, energy, communication, and consumer staples. The fund’s top five holdings are Reliance Industries Ltd., HDFC Bank Ltd., ICICI Bank Ltd., Infosys Ltd., and Kotak Mahindra Bank Ltd.. Its NAV as on 12 Aug 2022 is Rs. 50.69. The expense ratio for Invesco India Largecap Fund Direct-Growth is 0.90% (Inclusive of GST). The fund has a NIL exit load.
  • Minimum Investment Amount: Lump sum is Rs. 1,000 and via SIP is Rs. 100.
  • Fund Performance: The Invesco India Largecap Fund has given 3-year growth returns at 18.24% annualized and 5-year growth returns at 13.41%. Fund management – Amit Nigam – Sep 2020 – Present, Nitin Gosar – Mar 2018 – Present

Baroda BNP Paribas Large Cap Fund Direct-Growth

  • Baroda BNP Paribas Large Cap Fund Direct-Growth has assets under management (AUM) of Rs. 1,325.54 Cr as of 12/08/2022 and is a very high-risk, large-cap, equity fund. Most of the fund’s assets are invested in the financial, energy, technology, and construction sectors. ICICI Bank Ltd., HDFC Bank Ltd., Reliance Industries Ltd., Infosys Ltd., and Tata Consultancy Services Ltd. are the fund’s top five holdings. Its NAV on 12 Aug 2022 is Rs. 158.10. The expense ratio for Baroda BNP Paribas Large Cap Fund Direct-Growth is 0.96% (Inclusive of GST). The fund has an exit load for units over 10% of the investment, 1% will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 5,000 and via SIP is Rs. 500.
  • Fund Performance: The Baroda BNP Paribas Large Cap Fund has given 3-year growth returns at 18.08% annualized and 5-year growth returns at 13.64%. Fund management – Jitendra Sriram – Jun 2022 – Present

Axis Bluechip Fund Direct Plan-Growth

  • The Axis Bluechip Fund has assets under management (AUM) of Rs. 35,915.36 Cr as of 12/08/2022 and is a very high-risk, large-cap, equity fund. Most of the fund’s assets are invested in the financial, technology, services, energy, and communication sectors. ICICI Bank Ltd., Bajaj Finance Ltd., Infosys Ltd., HDFC Bank Ltd., and Avenue Supermarts Ltd. are the fund’s top five holdings. Its NAV as on 11 Aug 2022 is Rs. 49.67. The expense ratio for The Axis Bluechip Fund is 0.52% (Inclusive of GST). The fund has an exit load for units over 10% of the investment, 1% will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 5,000 and via SIP is Rs. 500.
  • Fund Performance: The Axis Bluechip Fund has given 3-year growth returns of 16.08% and 5-year growth returns of 15.46%. Fund management – Shreyash Devalkar – Nov 2016 – Present, Hitesh Das – Nov 2020 – Present

IDBI India Top 100 Equity Fund Direct-Growth

  • The IDBI India Top 100 Equity Fund has assets under management (AUM) of Rs. 600.85 Cr as of 12/08/2022 and is a very high-risk, large-cap, equity fund. Most of the fund’s assets are invested in the financial, energy, technology, and construction sectors. HDFC Bank Ltd., Reliance Industries Ltd., ICICI Bank Ltd., Infosys Ltd., HDFC Bank Ltd., and State Bank of India are the fund’s top five holdings. Its NAV as on 12 Aug 2022 is Rs. 44.41. The expense ratio for The IDBI India Top 100 Equity Fund is 1.30% (Inclusive of GST). The fund has an exit load of 1% and will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 5,000 and via SIP is Rs. 500.
  • Fund Performance: The IDBI India Top 100 Equity Fund has given 3-year growth returns of 20.76% and 5-year growth returns of 12.93%. Fund management – Alok Ranjan – Aug 2021 – Present

UTI Mastershare Direct Growth

  • UTI Mastershare Fund has assets under management (AUM) of Rs. 10,136.28 Cr as of 12/08/2022 and is a very high-risk, large-cap, equity fund. Most of the fund’s assets are invested in the financial, technology, energy, communication, and construction sectors. ICICI Bank Ltd., Infosys Ltd., HDFC Bank Ltd., Reliance Industries Ltd., and Bharti Airtel Ltd. are the fund’s top five holdings. Its NAV as on 12 Aug 2022 is Rs. 207.07. The expense ratio for UTI Mastershare Fund is 1.03% (Inclusive of GST). The fund has an exit load for units over 10% of the investment, 1% will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 100 and via SIP is Rs. 100.
  • Fund Performance: The UTI Mastershare Fund has given 3-year growth returns of 18.94% and 5-year growth returns of 13.9%. Fund management – Swati Anil Kulkarni Jan – 2013 – Present

Mahindra Manulife Large Cap Pragati Yojana Direct Growth

  • Mahindra Manulife Large Cap Pragati Yojana Fund has assets under management (AUM) of Rs. 179.74 Cr as of 12/08/2022 and is a very high-risk, large-cap equity fund. Most of the fund’s assets are invested in the financial, technology, energy, consumer staples, and automobile sectors. ICICI Bank Ltd., HDFC Bank Ltd., Infosys Ltd., Reliance Industries Ltd., and Housing Development Finance Corpn. Ltd. is the fund’s top five holdings. Its NAV as on 12 Aug 2022 is Rs. 16.69. The expense ratio for Mahindra Manulife Large Cap Pragati Yojana Fund is 0.73% (Inclusive of GST). The fund has an exit load of 1% and will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 1,000 and via SIP is Rs. 500.
  • Fund Performance: The Mahindra Manulife Large Cap Pragati Yojana Fund has given 3-year growth returns at 18.73% and 15.67% since its inception. Fund management – Abhinav Khandelwal – Mar 2022 – Present, Fatema Pacha – Dec 2020 – Present

IDFC Large Cap Fund Direct-Growth

  • IDFC Large Cap Fund has assets under management (AUM) of Rs. 1,066.11 Cr as of 12/08/2022 and is a very high-risk, large-cap, equity fund. Most of the fund’s assets are invested in the financial, technology, energy, construction, and communication sectors. HDFC Bank Ltd., ICICI Bank Ltd., State Bank of India, Reliance Industries Ltd., and Infosys Ltd. are the fund’s top five holdings. Its NAV as on 11 Aug 2022 is Rs. 55.10. The expense ratio for IDFC Large Cap Fund is 1.03% (Inclusive of GST). The fund has an exit load for units over 10% of the investment, 1% will be charged for redemption within 12 months.
  • Minimum Investment Amount: Lump sum is Rs. 5,000 and via SIP is Rs. 100.
  • Fund Performance: The IDFC Large Cap Fund has given 3-year growth returns of 18.18% and 5-year growth returns of 12.49%. Fund management – Sachin Relekar – Mar 2022 – Present, Sumit Agrawal – Mar 2017 – Present

Frequently Asked Questions

Before investing in large-cap funds, you must consider factors like Investment Risks, Expense Ratios, investment horizons, and Taxes on Capital gains.

Large-cap funds are ideal for investors seeking stable returns with relatively lower risk. These funds are based on the horizon of your investment. To get the most out of these funds, it is recommended that you should invest in them for at least 5-7 years. For investors with higher risk tolerance and an appetite for higher returns, it’s better to invest in mid or small-capitalization funds.

Large-cap funds have several advantages. They invest in companies that have performed well in the past and are known as permanent investment options. These are best for Investors who wish to balance risk and return. Large-cap-funds provide investment stability, better capital growth, sound investment decisions, high liquidity, and can withstand the recession because of their diversification into several sectors.

Large mutual funds are relatively less risky than the short and medium term when compared to other equity instruments.

No, returns from large-cap equity funds held longer than 12 months fall under the 10% tax bracket. However, returns up to Rs. 1 lakh are exempted from taxation. If the investment period is less than 1 year, the applicable tax deduction is 15%.

Like every other Mutual fund system, large-cap funds are also managed by professional fund managers or administrators.

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