What is a large cap mutual fund?

Large caps mutual funds are funds that invest in the top 100 companies in the stock markets. Caps in the large-cap mean market capitalization. Market Cap is calculated by multiplying share price by the total outstanding shares.

This type of funds is good for investors who want exposure to equity markets, but are risk-averse. Large-cap mutual funds are also good for investors who are saving for their retirement.

The investment horizon in these funds should be at least 8 to 10 years. Also, large caps underperform during a bull market but outperform in a bear market, thus it delivers a consistent return over a period of time.

The following article encapsulates in detail information about large-caps mutual funds.

How does large-cap funds work?

Large-cap mutual funds invest in large market cap companies. Large-cap mutual funds definition as per SEBI guidelines, large-cap mutual funds should invest 80% of their corpus in the top 100 companies by market cap. Market cap means market capitalization.

These companies are top-rated. They have a track record of financial performance as well as corporate governance. Large companies have a consistent history of dividend payments. Companies going bankrupt in these categories have very little chance.

Large-cap mutual fund portfolios are less riskier than small caps & mid caps funds. This fund is good for investors who are risk-averse but still want a part of their net worth to be invested in equities.

Large caps generally outperform small caps & mid-caps during a bear market as they deliver a consistent return.

Who should invest in large-cap mutual funds?

Large-cap funds invest in large-cap companies that are already well established. These companies are at the maturity stage of their life cycle. So desiring an exponential return is not advisable.  

Large funds are good for people who want to have a safe ride, risk-averse & have a long-term investment horizon.

Retirement funds should have exposure to large-cap mutual funds. These funds are relatively safer & can also bet the market over a period of time.

Large caps are not for the short term as the return achieved in these funds is lower.

Also, large caps may underperform during the bull run as compared to small & mid-caps as they are more consistent.

What to consider before investing in Large-cap funds?

Risk & Return

Large cap companies have a lower risk but at the same time, they also deliver a lower return.

During a bull run, these stocks may underperform as they outperform during a bear market. This happens because returns delivered by these funds are more consistent and steady.

Also, large caps are not zero risk investments they also have business risk & financial risk, so before investing, risk & returns should be considered.

Expense Ratio.

Large Cap mutual funds come with an expense so that your investment is well-managed. This expense is called the expense ratio.

The return achieved in large-cap mutual funds is lower, so the expense ratio is generally lower. Also, SEBI has set a maximum expense ratio to be not more than 2.5%.

Funds charging a high expense ratio should not be considered investable.

Financial goals

The goal of this fund is to give a slow & steady return at the same time compound wealth. As already mentioned large-cap mutual funds should be part of a retirement account. 

The stability in this portfolio is good for risk-averse investors.

Also Read –Taxation on Equity Mutual Funds.

Top 5 large cap mutual funds

Disclaimer:- The below scheme names are just examples, not recommendations.

Fund name Annual return
Axis Bluechip Fund 17.27%
Canara Robeco Bluechip Equity Fund 16.84%
Mirae Asset Large Cap Fund 16%
HDFC Index Sensex Fund 15.12%
Tata Index Sensex Fund 15.08%


I am not a SEBI registered investment advisor. This article is for information purposes any scheme or company name mentioned here is just for example & not a recommendation. 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. The past performance of the mutual funds is not necessarily indicative of the future performance of the schemes. 

Categories: Types


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