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Should I invest in large cap funds?

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A mutual fund described in terms of market capitalisation indicates the size of the companies in which the fund invests. Market capitalisation is defined as the number of shares outstanding multiplied by the current market price of one share.

Large cap funds refer to those funds which invest a larger proportion of corpus in companies with large market captalisaton. Therefore investment in large cap funds is a safer investment in comparison to others. Such companies have capital worth 20,000 crores or more. Large companies are more stable and therefore more trusted compared to all other businesses in the market and the funds that invest in these companies tend to provide stable returns. Returns from large cap funds are taxed at 15 percent if sold before one year of investment and none post one year. To summarise, such funds are suitable for investors who have a low risk appetite and want stable returns.


There are three categories of funds- large cap, mid cap, small cap, sectoral cap or multi-cap fund category. Each market capitalisation categories has its own advantages and disadvantages. To understand whether one should invest in these funds lets look at the key features of these funds:

  • A large portion of investment is done in companies which have large market capitalisation.
  • Investment is done in companies which are strong, reputable and trustworthy.
  • Large cap companies are well established player and are highly followed in the market. As a result the investments in large cap companies are less risk prone and wealth generation is slow.


  • Safe investments
  • Able to sustain in turbulence market conditions because of their size
  • Diverse (usually generate revenue from more than one source)
  • Information about these companies is readily available

An investor looking to invest a lump sum amount for longer duration, investment in large cap companies is a perfect choice. Large cap funds may give you good returns over the long term. These are ideal for investors with low risk appetite. An investor needs to be patient while investing in such funds.


Large Cap Funds are generally the ones with huge market capitalisation. Large cap funds are known to offer stable and sustainable returns over a period of time, but might be outperformed by small and mid cap funds, which have higher risk exposure.

The risk involved in a large cap funds is very low as compared to mid cap and small cap funds, since these funds invest in companies with huge corpus and an established brand. Large cap companies are very stable and have been running for a long time.

Companies of large cap funds may be leaders in their segments and are less prone to volatility. They may also fall less during a bad phase in the market. The opposite is also true: they won’t give huge returns like unknown shares when the market is in a bull phase.

It is advised by industry experts that a risk averse investor should prefer to invest in large cap funds, whereas a person willing to take risk and expecting huge returns should invest in mid cap and small cap funds as per his/her risk appetite. First time investor should prefer to invest in large cap funds. Investing for a long time is advisable if investment is made in large cap funds.

Volatility of shares in large cap funds is comparatively low, which makes it a safe investment. Moreover, future prospects of large cap companies is great. Also the Foreign Institutional Investors (FII) prefer to invest in large cap funds. After reading the above mentioned information, an investor can smartly decide whether he wants to invest in large cap funds or not.

Below are mentioned few of the top large cap funds:

Pijush Kanti Biswas

Thinking of investing in an equity mutual fund, it is very crucial to decide on most appropriate market capitalization to choose the fund from – i.e. among large cap, mid cap, small cap, sectoral cap or multi-cap fund category. Each category of market capitalization categories has its own advantages.

In large cap fund, a large portion of investment is done in companies with large market capitalization. These companies are strong, reputable and trustworthy. Large cap companies are mature and firmly established players in the market having a strong corporate governance practices. Also, these companies are well researched and highly followed in market. Over a long term, these large cap funds might generate wealth slowly and steadily for their investors.

Large cap funds have great future prospects in Indian under its current economic situation. Our Indian stock markets depends a lot on Foreign Institutional Investors (FII) flows though the domestic buyers also catching up fast. FII mostly invest their money in the stocks of large capitalization companies. With the boost in ranking of Indian in ease of doing business and latest capital infusion of INR 2.11 Lakh crore in Public Sector Banks (PSB), Indian economy is on recovery track, which will in term bring in more investment from FII in these large cap companies.

So, if you are thinking of investing a lumpsum amount or for longer duration, large cap funds are just perfect choice for you. Large cap funds may give you good returns on your lumpsum investment over the long term. The companies in the large cap funds portfolio are steady compounders and pay dividend on regular basis. They are ideal for investors with low risk appetite. With large cap funds adopt a long-term perspective, be patient and remain invested to get good returns over the long term.

Happy Investing!!

Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.
Past performance is not indicative of future returns. Please consider your specific investment requirements, risk tolerance, investment goal, time frame, risk and reward balance and the cost associated with the investment before choosing a fund, or designing a portfolio that suits your needs.