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Should You Invest In Large Cap Mutual Funds?

Mutual funds (MFs) pool your money and invest it in securities like equity, bonds, or short-term debt. MFs fall into three main categories; equity, debt, or hybrid. Equity funds that invest a significant part of their assets in companies with a large market capitalization are known as large-cap funds. 

What Are Large-Cap Funds?

Large-cap funds invest 80% of the pooled corpus in the 100 largest companies (in terms of market capitalization) listed on the stock exchange. No standard definition is available to describe a large-cap company; generally, they are companies with a market capitalization of more than Rs. 10000 crore 

You can calculate market capitalization by multiplying the market price per share by the number of equity shares the company has issued. Large-cap funds invest the remaining part of the assets in mid-cap and small-cap companies. 

What are the Benefits of Investing in Large Cap Funds?

Large-cap mutual funds offer the following advantages:

  • Stability

Large-cap funds invest in financially strong companies with sound business plans, consistent revenue streams, and steady growth prospects. They pay dividends regularly and offer stability to the portfolio.

  • Capital Appreciation

Blue-chip companies have consistent returns and offer good returns. They offer better capital appreciation to investors.

  • Liquidity

Large-cap funds have higher liquidity, which is crucial in times of volatility. Investors can liquidate their portfolio with ease at short notice also. Mutual fund managers can buy and sell the large-cap equity efficiently, which allows them to manage funds better and maximize returns.

  • Diversification

Another benefit of large-cap funds is diversification. These mutual funds have stocks of companies from diverse sectors; investors get the benefits of a diversified portfolio without the need to monitor stocks individually.

Should You Invest In Large-Cap Funds?

  • If you want to enjoy the benefits of investing in equity but would like to avoid fluctuations in returns over time, then large-cap funds are for you. 
  • Large-cap funds are financially stable and withstand the bear markets better. They provide steadiness to an investor’s portfolio. 
  • You should invest in large-cap funds if:
    • You are new to investing; 80% of the large-cap fund’s corpus is in companies with a strong financial background.
    • You want steady returns and have a low-risk appetite.
    • You are willing to stay invested for five to seven years. 

Keep in mind the following when investing.

  • Expense ratio 

One of the advantages of investing in mutual funds is professional management by experts. However, this management comes with a cost known as the expense ratio. When selecting a large-cap fund, look for funds with a low expense ratio for higher returns. 

  • Taxation

Mutual funds sold after a year of investment and a gain of up to Rs one lakh are exempt from tax. Gains above Rs one lakh attract tax at 10%.

The tax rate for profits on units sold within a year is 15%.

Nippon India Large Cap Fund

There are numerous large-cap MFs available for investment. Here we focus on one such fund. 

Nippon India Large Cap Fund Direct-Growth, launched in 2013, is an MF that invests in large-cap companies. The primary objective of this mutual fund is to generate long-term capital appreciation through investing in equity and equity-related instruments of large-cap companies.

The fund’s secondary objective is to generate consistent returns through investments in debt, money market securities, REITs, and InvIT.

Some basic facts about the fund are listed below:

  • As of 31/3/2022, the value of assets under management (AUM) was Rs 11,204 crores.
  • The expense ratio for the fund is 0.23%, lesser than most funds in the same category.
  • Nippon India Large Cap Fund invests majorly in the finance, technology, energy, services, and consumer staples sectors.
  • The top 10 holdings of the funds are in HDFC Bank, ICICI Bank, Reliance Industries, State Bank of India, HCL Technologies, ITC Consumer Staples, HDFC Financial, Infosys Technology, The Indian Hotels Company Services, Axis bank.
  • Nippon India Large Cap Fund falls in the category of high-risk investment.
  • The table below gives returns on the fund for different time horizons.
Time Frame Return
10 years return 14.92%
7 years return 11.30%
5 years return 12.68%
3 years return 12.27%
1 year return 29.34%


  • You can invest a lump sum or choose to invest monthly in the Nippon India Large Cap Fund.
    • An investment of Rs 5000 invested in the Nippon Indian Large Cap Fund monthly for five years would result in a corpus of Rs 4.54 lakhs at an annualized return of 16.61%. 
    • Rs 1 lakh invested for five years would yield a corpus of Rs. 1.88 lakhs at an annualized return of 13.48%. 


The Takeaway

Mutual funds are a popular investment choice; they offer professional management and versatility. You can find a fund that suits your financial goals. Invest in a large-cap fund after careful research. Look at their past performance but remember, past performance does not guarantee future returns. Invest in large-cap funds only if you want to stay invested for the long-term and they match your risk appetite.

Marketvein Staff
Marketvein Staff
Born libra, likes to lead from the front. Digital Marketing & Technology is his strength. He has pursued engineering. Travelling to new places & writing is his idea of fun. In his free time (if he gets some that is), he is seen donning the chef's hat at home.
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