The 100 biggest companies in India are known for their iconic status and consistency. This category includes Reliance, TCS, Infosys, and more which have decades' worth of solid track records.
But the truth is, picking the best stocks out of the top 100 companies in India can be challenging. There are too many options and too much research involved. The solution? Large-cap mutual funds.
What Is A Large-Cap Mutual Fund?
A large-cap mutual fund is an equity fund that invests in the top 100 stocks in India by market capitalization. These stocks are of companies that have produced consistent returns across decades.
The stocks large-cap mutual funds invest in are relatively stable to mid-cap and small-cap stocks. The reason? Large-cap stocks are shares of well-established companies. Think of them as iconic industry leaders.
Because of this, top large-cap funds can generate returns in the range of 12% to 16% over the long run. Thus, large-cap funds may be suitable for those who want a flavour of equity funds without significant risk.
That said, you’d still have to pick large-cap funds for your portfolio. We’re going to make your research easy with the following list of the best large-cap mutual funds in 2022.
Fun fact: Reliance Industries has a larger market cap than US companies like Walt Disney, Intel, McDonald’s, Wells Fargo, and more.
Best Large-Cap Mutual Funds In 2022
Cube makes this easier for users to invest in top large-cap funds by partnering up with a leading mutual fund expert, Wealth First. WF has been in the game for over 20 years.
Wealth First goes beyond 5-star ratings for large-cap funds and other mutual funds. They curate mutual funds the right mutual funds for you based on multiple qualitative and quantitative factors.
Now that you are aware of the fund-picking philosophy on Cube, here is a sneak peek into the list of top large-cap funds that you can invest in for 2022.
1. Mirae Asset Large Cap Fund
Mirae Asset Large Cap Fund has been on the market since 2008. The large-cap fund has 63 stocks in its portfolio which includes the likes of HDFC Bank, ICICI Bank, Infosys, and more.
This top large-cap fund has a 10-year track record of beating the benchmark index S&P BSE 100 TRI (16.97% vs 14.56%). Furthermore, 3-year returns stand at 12.86% and 5-year returns at 10.93%.
Fund name: Mirae Asset Large Cap Fund
AUM: ₹31,722 crores
3-year returns: 12.86%
5-year returns: 10.93%
Expense ratio: 1.57%
Top 5 Holdings
2. Axis Focused 25 Fund
Axis Focused 25 Fund is an equity fund that’s geared towards large-cap stocks. Launched in 2012, this large-cap fund holds 33 stocks, including TCS, Bajaj Finance, Kotak Mahindra Bank, and more.
Axis Focused 25 Fund has outperformed the Nifty 50 TRI benchmark index since inception (14.65% vs 11.66%). It has generated 12.29% in the last 3 years and 10.35% in the last 5 years.
Fund name: Axis Focused 25 Fund
AUM: ₹19,146 crores
3-year returns: 12.29%
5-year returns: 10.35%
Expense ratio: 1.64%
Top 5 Holdings
Kotak Mahindra Bank
3. Motilal Oswal Focused 25 Fund
Motilal Oswal Focused 25 Fund is an equity fund that primarily invests in large-cap stocks. It was launched in 2013 and its portfolio of 24 stocks includes ICICI Bank Ltd, ICICI Bank, Infosys, and more.
Fund name: Motilal Oswal Focused 25 Fund
AUM: ₹1,652 crores
3-year returns: 11.46%
5-year returns: 7.44%
Expense ratio: 2.19%
Top 5 Holdings
Reasons To Invest In Large-Cap Funds?
1. Solid Returns
While a large-cap fund may not generate the same returns as a mid-cap or small-cap fund, it can help you beat inflation and traditional investments like fixed deposits.
Companies in the large-cap space have already made their mark in the industry they’re in and carved out a position for themselves. This impacts the room for growth, although their returns are still lucrative.
Check out this table to know what would’ve happened if you invested ₹1,00,000 in a Cube recommended large-cap fund.
Mirae Asset Large Cap Fund
Axis Focused 25 Fund
Motilal Oswal Focused 25 Fund
**Note: values are approximate & based on past returns.
2. Relatively Low Volatility
Large-cap funds are less prone to fluctuations than their mid-cap and small-cap counterparts. The reason for the relatively low volatility is the same as that for stable returns.
Large-cap companies are behemoths in their industry and have the ability to handle the stress of the markets better than others. You can read more about these factors here.
Investing in a top large-cap mutual fund means owning a basket of stocks and other securities. This implies that you get a lot for the price of one. Check out the best large-cap funds mentioned above.
They hold anywhere from 25 to 65 stocks in their portfolio with each stock bringing its own advantages to the fold. Every large-cap fund is managed by an experienced fund manager and a team of analysts.
This means that you can save time, effort, and money by investing in the right large-cap mutual funds. Does that mean you should pick large-cap funds on your own? Watch this video to know more.
Risk Involved In Large-Cap Mutual Fund Investments
1. Over/Under Diversification
As an investor who buys mutual funds on their own, you could run into two scenarios. The first is when you end up buying too many large-cap funds with overlapping portfolios.
Here, you’re diversifying your portfolio on paper but own the same stocks overall that could be sub-optimal for your wealth creation goals. The second is buying too many large-cap funds with diverse portfolios.
In such a case, you’ll incur a high investment cost. Instead, it’s best to consult a trained financial professional who can help you invest in large-cap funds based on your financial goals and risk profile.
2. Market-Linked Asset
At the end of the day, large-cap funds are market-linked assets that are prone to the rigours of the market, albeit to a lesser extent than others like small-cap and mid-cap funds.
That’s why investors must evaluate their risk profile thoroughly before investing in large-cap funds. You can do this by taking a risk quiz on an app like Cube Wealth.
3. High Investment Cost
Equity funds are generally known to carry a higher investment cost. That’s because of the management fees charged by AMCs for handling the day to day business of the fund.
Investors must thus pay attention to the number of large-cap funds, and on a broader level, the number of equity funds they hold. You can read more about this here.
Taxability Of Large-Cap Mutual Funds
You will have to pay a Short Term Capital Gains (STCG) tax if you hold your large-cap fund for less than a year. STCG is currently taxed at 15%. The other tax is on Long Term Capital Gains (LTCG).
If you decide to sell your large-cap funds after 3 years, you’ll have to pay an LTCG tax of 10%. Gains of up to ₹1,00,000 on large-cap funds are tax-free.
Things To Consider Before Investing In Large-Cap Mutual Funds
1. Your Risk Appetite
A large-cap fund’s stable returns and low volatility can be favourable factors for wealth creation. But, you must take into your risk appetite as well before investing. The reason? Large-cap funds are market-linked.
The best way to get an idea of your risk profile is to:
Your life will be full of financial goals ranging from the short term to the long term. Investing is a means to achieving all those goals in a measured manner.
Thus, you must analyze financial goals to see whether large-cap funds can help you achieve them. For example, equity funds like large-cap funds are suitable for the long term (5+ years).
A good question to ask here would be do I have long term goals? If yes, are large-cap funds the right asset to achieve them, given my risk appetite? For more information on defining investment goals, read this.
3. Quality & Track Record
The world of mutual funds is a diverse place. You’ll find that there are good large-cap funds, bad large-cap funds, and the right large-cap funds for you.
Evaluating each fund on multiple criteria is necessary to ensure that you choose the right ones. This means going beyond a large-cap fund’s star ratings and into details like the track record, turnover, and more.
Doing this may be difficult for working professionals. That’s why you could benefit from a service like Cube that gives you access to large-cap funds that can work for you. Download Cube To Know More.
Note: Facts & figures are true as of 19-05-2022. None of the information shared here is to be construed as investment advice. Exercise caution when investing in assets like stocks, mutual funds, alternative investments, and others.
Curious about personal finance and all things money. Can either find me reading a book or dancing to a tune.
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