Lately, the Indian stock market has been volatile

On one hand, we have Nifty which is doing extremely well

On the other hand, many mid-cap and small-caps have seen the brunt in this period of uncertainty. Mid-cap and small-cap stocks had a dream run from 2014 to 2017 and last year, small caps were up by around 55 percent.

However, these small-caps have now gone down by more than 23 percent from the highs of January, whereas during the same period, mid-caps have decreased by more than 15 percent.

Also Read :Best Large Cap Funds-2018

Why Invest in Large Cap Funds?

1. Fluctuation in the Equity Market

Last month, the Indian equity markets experienced outflows from FPIs (Foreign Portfolio Investors), rate hike by RBI and concerns over rising oil prices.

The stress can also be seen in the Indian Rupee, which has been the worst performer in Asia and emerging market basket.

Large-Cap stocks have remained relatively stable despite the downfall and hence, a better investment option.

Hence, large-cap funds are for all you investors who do not wish to travel the risky road of small and mid-cap funds.

2. Re-Categorization of Mutual Funds

To some extent, re-categorization of mutual fund schemes is also impacting the stocks, but that is not a big churn. These factors are not just on small and mid-caps but the entire market.

However, small and mid-cap funds have been affected the most.

 3. The Market is Volatile

Amidst market volatility, large-cap stocks have performed exceedingly well and have become the flavor of the investors.

As can be seen in Figure 1, the absolute returns for large caps over the past one year has been better than both mid-caps and small-caps.

In fact, most money managers believe that large-cap stocks are better placed than mid-cap and small-cap stocks, and they would fare better in times of a correction.

 

                                                          As on June 30, 2018 (Last one year)            Returns     

NIFTY 50 (A)

12.5%

NIFTY Midcap (B)

2.5%

Outperformance Vs. NIFTY 50 (A-B)

10%

NIFTY Smallcap (C)

-1.8%

Outperformance Vs. NIFTY 50 (A-C)

14.3%

                                                                                         Figure1                                                                                                             

Large-cap schemes, as the name suggests, invest in stocks of large companies or stocks with large market capitalizations.

These large companies may be leaders in their domain and they are relatively more stable than smaller companies in a volatile market.

This makes them ideal for investors who want to create wealth without taking the extra risk or exposing their corpus to a lot of volatility. Therefore, these factors make large-cap schemes ideal for investment in these periods of divergences.

 

Fund Name

3-Year Return (%) 5-Year Return (%)

10-Year Return (%)

Nifty 50 13.74 10.62 14.52
Nifty 100 11.12 15.51 12.33
SBI Bluechip Fund 9.85 18.30 13.52
Mirae Asset India Equity Fund 12.95 21.42 17.86
Reliance Large Cap Fund 9.58 19.16 13.32
ICICI Prudential Bluechip Fund 11.04 17.16 15.59
Axis Bluechip Fund 12.61 16.98

Figure 2

As can be seen in Figure 2 (above), these funds have given a consistent return over the lifetime i.e. 3-year, 5-year and 10-year.

Also, the returns generated by these funds, have beaten the NIFTY 50 and NIFTY 100 Index for the given periods. The investment style followed by these companies is that of growth, in terms of sectors.

In terms of financial weightage, the major holdings are in companies like, HDFC Bank Ltd, HDFC Ltd., Kotak Mahindra Bank, Indusind Bank, Bajaj Finance, Mahindra & Mahindra Financial Services, which have performed exceedingly well in recent times.

Other major sectors in which these funds have invested are those of Automobiles followed by Energy. This includes marquee names such as Maruti Suzuki India Limited, Mahindra & Mahindra, Reliance Industries Limited and GAIL.

Some of the Best Large-Cap Funds and Their Portfolio Allocations:

1.SBI Bluechip Fund

This fund has invested 92.2% in equity; debt is 1% and cash component is 6.8%. The fund has broken down the equity investments into large caps (79.6%) and in mid-cap stocks (13.2%). The total fund size of SBI Bluechip is 19,121 crores.

Fund Start Date: – 01 Jan 2013                 Risk: – Moderately High                      Expense Ratio: – 1.15%

The top 10 holdings of the fund (in the highest to lowest order is as shown below):-

Company Name Sector Weightage (%)
HDFC Bank Ltd. Financial Services 8.4%
CBLO (CCIL) Current Assets 5.8%
Larsen & Toubro Ltd. Construction 4.9%
Mahindra & Mahindra Ltd. Automobile 3.7%
ITC Ltd. Consumer Goods 3.4%
Nestle India Ltd. Consumer Goods 3.0%
Hero MotoCorp Ltd. Automobile 2.5%
Kotak Mahindra Bank Ltd. Financial Services 2.5%
Cholamandalam Investment and Finance Company Ltd. Financial Services 2.5%
IndusInd Bank Ltd. Financial Services 2.5%

2. Mirae Asset India Equity Fund

This fund has invested 97% in equity; debt is 0.3% and cash component is 2.7%. The fund has broken down the equity investments into large caps (82.3%) and in mid-cap stocks (14.7%).

The total fund size of Mirae Asset India Equity Fund is 7,733 crores.

Fund Start Date: – 01 Jan 2013               Risk: – Moderately High                         Expense Ratio: – 1.32%

The top 10 holdings of the fund (in the highest to lowest order is as shown below):-

Company Name Sector Weightage (%)
HDFC Bank Ltd. Financial Services 8.7%
Infosys Ltd. IT 5.4%
ICICI Bank Ltd. Financial Services 4.8%
Housing Development Finance Corporation Ltd. Financial Services 4.3%
Larsen & Toubro Ltd. Construction 4.0%
Reliance Industries Ltd. Energy 3.8%
ITC Ltd. Consumer Goods 3.7%
State Bank of India Financial Services 3.2%
IndusInd Bank Ltd. Financial Services 3.0%
Kotak Mahindra Bank Ltd. Financial Services 2.9%

3. Reliance Large Cap Fund

This fund has invested 99.1% in equity; debt is 0.5% and cash component is 0.4%.

The fund has broken down the equity investments into large caps (81.5%) and in mid-cap stocks (16%).

The total fund size of Mirae Asset India Equity Fund is 10,054 crores.

Fund Start Date: – 01 Jan 2013             Risk: – Moderately High                         Expense Ratio: – 1.12%

The top 10 holdings of the fund (in the highest to lowest order is as shown below):-

Company Name Sector Weightage (%)
State Bank of India Financial Services 6.3%
HDFC Bank Ltd. Financial Services 4.9%
Larsen & Toubro Ltd. Construction 4.7%
ITC Ltd. Consumer Goods 4.5%
ICICI Bank Ltd. Financial Services 4.3%
Infosys Ltd. IT 4.0%
Tata Steel Ltd. Metals 3.3%
Divis Laboratories Ltd. Pharma 2.9%
ACC Ltd. Cement & Cement Products 2.9%
Indian Oil Corporation Ltd. Energy 2.7%

4. ICICI Prudential Bluechip Fund

This fund has invested 95.8% in equity; debt is 1.3% and cash component is 3%.

The fund has broken down the equity investments into large caps (93.3%) and in mid-cap stocks (1.9%).

The total fund size of Mirae Asset India Equity Fund is 16,539 crores.

Fund Start Date: – 01 Jan 2013             Risk: – Moderately High                         Expense Ratio: – 1.26%

The top 10 holdings of the fund (in the highest to lowest order is as shown below):-

Company Name Sector Weightage (%)
ICICI Bank Ltd. Financial Services 7.4%
HDFC Bank Ltd. Financial Services 6.2%
CBLO(CCIL) Current Assets 5.0%
Infosys Ltd. IT 4.7%
State Bank of India Financial Services 4.1%
ITC Ltd. Consumer Goods 3.6%
Motherson Sumi Systems Ltd. Automobile 3.6%
Larsen & Toubro Ltd. Construction 3.6%
Maruti Suzuki India Ltd. Automobile 3.5%
Power Grid Corporation of India Ltd. Energy 3.3%

5. Axis Bluechip Fund

This fund has invested 86.2% in equity; debt is 1.6% and cash component is 12.2%. The fund has broken down the equity investments into large caps (84.2%) and in mid-cap stocks (6.1%). The total fund size of Mirae Asset India Equity Fund is 2,081 crores.

Fund Start Date: – 01 Jan 2013             Risk: – Moderately High                       Expense Ratio: – 0.99%

The top 10 holdings of the fund (in the highest to lowest order is as shown below):-

Company Name Sector Weightage (%)
HDFC Bank Ltd. Financial Services 9.8%
Kotak Mahindra Bank Ltd. Financial Services 8.2%
Maruti Suzuki India Ltd. Automobile 7.0%
Housing Development Finance Corporation Ltd. Financial Services 6.5%
CBLO(CCIL) Current Assets 5.8%
Bajaj Finance Ltd. Financial Services 4.8%
Avenue Supermarts Ltd. Consumer Goods 4.0%
ICICI Bank Ltd. Financial Services 3.5%
Infosys Ltd. IT 3.4%
Britannia Industries Ltd. Consumer Goods 3.3%

Moreover, if an investor were to start a Systematic Investment Plan (SIP), these funds can be a suitable avenue as well, because these have generated handsome returns (for SIPs) over a period of time.

All the above funds have a minimum SIP of Rs.500. The figure below shows what the returns of each fund will be after 3,5 and 10 years respectively

Figure 3

                  SIP Returns
Fund Name 3-Year Return (%) 5-Year Return (%) 10-Year Return (%)
SBI Bluechip Fund 10.86 14.05 15.22
Mirae Asset India Equity Fund 15.21 16.96 18.30
Reliance Large Cap Fund 12.79 14.44 14.83
ICICI Prudential Bluechip Fund 13.30 13.68 15.29
Axis Bluechip Fund 19.22 16.15

Therefore, an investor who at the moment is in a dilemma might invest in these funds (lump sum or through SIPs) to pursue his/her goals of long-term capital appreciation.

Also Read: Comparison of Returns from Large-Cap and Small-Cap Funds

Happy Investing!

Disclaimer: The views expressed in this post are that of the author and not those of Groww