Sharekhan Blog

What Is Large Cap Fund?

  • May 2, 2024

Large-cap companies are well-established entities with a respectable vintage and reputation.They are reliable because of their steady corporate governance.Recently, SEBI's reclassification has changed the basis for classifying an organisation as large-, small-, or mid-cap. So, large-cap mutual funds are equity funds of the top 100 large-cap organisations in terms of market capitalisation.

Large Cap Funds: Who Must Invest?

A popular form of equity fund — large cap mutual funds — mainly invests its assets under management in companies with high capitalisation equity shares. 

These businesses that fit into this category are well-known for having a solid reputation in the industry. You may be sure that your investments in firms with a strong medium- to long-term track record of performance are being made with the top Large-cap funds.

Compared to mid-cap or small-cap equities, large-cap funds may disappoint investors regarding market return expectations despite having the top funds in the world.

Why Invest In Large Cap Mutual Funds?

A few of their characteristics already suggest the advantages of large-cap funds. But from the perspective of the investor, the best large-cap fund has the following benefits:

1.An investor can purchase shares in several large capital corporations using a single large-cap fund. In this manner, gains from different equities can be realised.

2. A diversified stock portfolio reduces risk because, even if one or a few perform poorly, most stocks will probably rise in value.

3. Blue-chip funds provide long-term consistent returns since these companies are pioneers, dominate in their respective industries, and can weather market downturns.

4. Fund managers attempt to maintain sectoral diversification even if blue-chip funds focus mostly on large-cap stocks.

5. Investors select these funds as their preferred alternative since they are highly liquid, consistently grow, and withstand market turbulence.

Key Attributes of a Large Cap Fund

The following factors should be taken into account when investing in large-cap funds:

Risk and Reward

Conditions in the market have an impact on all equity mutual funds. Net Asset Value (NAV) increases up or down with changes in the scheme's benchmark. But the NAV of a large-cap fund doesn't move around as much as that of small- and mid-cap schemes.

Consequently, your investment portfolio will be stable if you invest in large-cap schemes. However, these schemes often yield smaller returns than mid-cap or small-cap funds. Remember that these funds are an option if you want steady returns with less risk.

Don't Invest for the Short Term

Large-cap funds also see portfolio underperformance during market downturns. Nevertheless, this underperformance levels out over time because the funds are invested in stable businesses.

It is generally accepted that returns on your investments should be between 10 and 12 per cent if you remain invested for longer than seven years. Hence, individuals with a long investment horizon are typically advised to consider these mutual funds.

Think about your financial objectives.

Large-cap mutual funds provide stable returns with a manageable level of risk. As a result, while making retirement investment plans, many individuals look to these schemes.

Additionally, large-cap mutual funds are preferred by investors who wish to access the equity markets without taking on excessive risk. Before making any investments, it's critical to think about your financial objectives.

Large Cap Funds Taxation

All other equity assets are treated the same way tax-wise by large-cap funds. Gains on capital assets held for fewer than a year are short-term capital gains (STCG). This is subject to a 15% tax.

However, profits on investments retained for over twelve months are long-term capital gains. The current tax rate states that LTCG is exempt from taxation up to INR 1,00,000 in a fiscal year. Any amount over this cap is subject to 10% taxation without indexation benefit.

How Do You Invest In Large-Cap Mutual Funds?

These mutual funds can be purchased by sending a properly completed application, a cheque or bank draft to the Registrar and Transfer Agents of the relevant mutual funds, a branch office or a designated Investor Service Centre (ISC) of large-cap mutual funds.

Additionally, investing can be done online by going to each mutual fund's website. Also, one can invest with Sharekhan's help. It saves you from going through a drawn-out, time-consuming process to invest in large-cap funds. To get started, simply download the Sharekhan application, finish the KYC procedure, and choose an appropriate fund to invest in.

Ending Note

In summary, large-cap funds provide a wise basis for portfolios looking for modest growth with relative risk mitigation because they emphasise long-term stability and industry leaders. Although they are not immune to market swings, investors who value capital preservation and consistent returns view them as a solid foundation due to their proven track record and solid financials.

With the wide range of large-cap funds offered by Sharekhan, you may customise your investing path to meet your unique investing objectives and risk tolerance. Investigate our options and begin constructing a financially independent future right now.


Team Sharekhan
by Team Sharekhan

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