Investing in the Indian stock market might seem overwhelming, but there is a simple and reliable option for newcomers–large-cap mutual funds. Large-cap funds primarily allocate a significant portion of their assets under management to equity shares of companies with large market capitalization.
These funds typically focus on investing in well-established companies that enjoy a strong reputation in the market. These funds focus on the top 100 companies in India, providing a mix of growth and security. In this article, we will explore the world of large-cap mutual funds, covering their benefits, features, tax implications, and the top large cap funds in the mutual fund industry.
Who Should Invest in Large Cap Funds
- Investors who want to own shares in India’s leading companies, which are reliable and established market leaders.
- Those seeking less risky returns, as large-cap companies are better equipped to handle market changes and economic challenges compared to smaller companies.
- Investors looking for a solid core portfolio can include Large Cap funds, offering good returns with relatively lower volatility.
Taxation on Large Cap Funds
- Large Cap funds are treated similarly to other equity assets for tax purposes.
- Short-term capital gains (STCG) are gains made on investments held for less than a year and are taxed at 15%.
- Long-term capital gains (LTCG) are gains made on investments held for more than a year. Up to ? 1 lakh in a financial year, there’s no tax on LTCG. Amounts exceeding this limit are taxed at 10% without indexation advantage.
Below is a compilation of top-performing large-cap funds:
List of Best Large Cap Mutual Funds as Per My Money Panda
(Based on data as of Jan 2024)
| Funds | Fund Size | Return in 5 year |
| Nippon India Large Cap Fund | 15,855 Crores | +21.40% |
| Kotak Bluechip Fund | 6370 Crores | +17.38% |
| SBI Bluechip Fund | 38,881 Crores | +17.56% |
| Canara Robeco Bluechip Equity Fund | 10,090 Crores | +17.25% |
| ICICI Prudential Bluechip Fund | 40,079 Crores | +18.68% |
Advantages of Large Cap Funds
1. Financial Stability
- Investing in large-cap companies comes with the benefit of financial stability.
- These companies have a history of surviving tough financial times and managing well in unpredictable markets.
- Their loyal customer base helps them stay stable during market downturns.
- Investors feel more confident in these companies because they are industry leaders with solid plans and stocks, resulting in a lower failure rate compared to newer or smaller businesses.
2. Stable Income Generation
- Large-cap funds are a good choice for investors who prefer a stable income.
- These companies, being highly valued and competitive, generate consistent profits.
- Experienced managers at the helm of these companies can handle market challenges effectively, contributing to stable income generation.
3. Diversification Benefits
- Large-cap funds offer diversification benefits to investors.
- By investing in top companies across different industries, the risk is spread out.
- The success or failure of any one company has a smaller impact on the overall fund return, making the investment more secure.
4. High Liquidity
- Large-cap stocks are more liquid compared to mid-cap or small-cap stocks. This means that buying or selling shares of these companies has minimal effect on their stock prices.
- Consequently, large-cap funds have high liquidity, making it easy for investors to buy or sell shares and adjust their positions based on market fluctuations.
Things to note before investing in the best large-cap mutual fund:
Before investing in a large-cap mutual fund, there are some important considerations to make.
Returns
Large-cap funds offer stable returns, but small- or mid-cap funds
may have higher returns because of their companies’ growth potential.
Risk
A large-cap fund is a relatively safe investment because it is not
risk-free. Large-cap funds are influenced by market factors.
Investment Horizon
Align your investment choices with your financial goals. Large-cap
funds are ideal for long-term wealth creation and income generation, not short-term gains.
FAQs
1. Which large-cap is best?
Your specific financial goals and risk tolerance will determine which large-cap fund is the best. For customized guidance, think about speaking with a financial advisor.
2. Which cap fund gives the highest return?
It’s necessary to remember that fund returns can fluctuate over time and that past success is not always accurate for future outcomes. The market is volatile, and the fund manager’s investing strategy is one of two additional factors that have an impact on returns.
3. Which is the best large-cap or mid-cap mutual fund?
Your investment goals and risk tolerance should be considered when choosing between large-cap or mid-cap mutual funds. Evaluate performance, approach, and management. A balanced portfolio includes both. Consult a financial expert for personalized advice.
4. Is it safe to invest in large-cap mutual funds?
Investing in large-cap mutual funds still carries some risk. No investment is without risk, and this must always be kept in mind. The market, the economy, and company-specific factors could still affect large-cap funds, even though they are relatively safer. Before making any financial decisions, you should do plenty of research, diversify your investment portfolio, and consider your own risk tolerance and investment goals.
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