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Best Large Cap Mutual Funds 2021 – Top Large Cap Funds

Author Deepika Khude | Posted February 6, 2021

Best Large Cap Mutual Funds

Best Large Cap Mutual Fund for 2021 – Top Large Cap Fund 

Large Cap Fund Rating 6 months 1 Year 3 Years 5 Years AUM Expense Ratio
Axis Bluechip Fund 5 Stars 30.87% 21.04% 16.47% 17.52% 22,518 1.78%
UTI Mastershare 4 Stars 35.13% 25.33% 11.72% 15.02% 7,430 1.97%
Canara Robeco Bluechip Equity 4 Stars 32.95% 28.08% 15.85% 17.89% 1,364 2.23%

*This is simply the list of best large-cap funds. This is not investment advice.

Have you always wanted to invest in mutual funds but were scared of market risks? What if there was a ‘safer’ way of investing in the stock market?

Introducing Large Cap mutual funds.

Watch this video to understand bluechip stocks

What are Best Large Cap Mutual Funds?

Large cap mutual funds are considered to be the safest type of equity mutual fund. Large cap funds invest in top 100 companies in the market, also known as blue-chip companies. These top 100 companies have a market capitalisation of more than Rs 20,000 Crores.

The Securities and Exchange Board of India, SEBI defines large cap mutual funds as ‘Funds that primarily invest in the top 100 companies’.

As per SEBI, a Large cap mutual fund must invest 80% of its corpus in stocks of Large cap companies. The remaining 20% can be invested in midcap and small cap companies.

So, when you invest in a large cap mutual fund, you are investing in companies with highest market capitalisation. These companies are well established, market leaders, have strong balance sheets, competitive edge and quality management. These companies can withstand tough economic conditions.

Large cap mutual funds are less volatile than mid and small cap funds. These funds have a solid track record of sustaining through bull and bear markets.

Who Should Invest in Best Large Cap Mutual Funds?

Large cap mutual funds are suitable for low and medium risk investors. They are also great for beginners in mutual funds.

1. Low risk investors: Large cap mutual funds are perfect for low-risk investors as they invest in stocks of companies which have strong fundamentals.

Being market leaders, these companies face less volatility than mid or small cap funds. Also, since these companies have been in the market for a long period, they are more prepared to face market ups and downs.

2. Mutual Fund Beginners: Large cap mutual funds are also suitable for mutual fund beginners. While starting their investment journey, investors might not want to take high risk by investing in mid and small cap companies.

But these investors would like to earn higher returns than debt funds.

In such cases, Large cap funds are the perfect solution for beginners. They get higher returns (than debt funds) at lower risk (than mid and small cap funds).

3. Retirees: Large cap mutual funds are apt for senior citizens who need a stable source of income. Large cap companies provide regular dividends which is perfect for retirees.

Who Should Not Invest in Best Large Cap Mutual Funds?

While there are no restrictions on investing in Large cap funds, high risk investors might be disappointed with the risk – reward ratio of Large cap funds.

Large cap funds take low risk hence their returns are lower than mid and small cap mutual funds.

High risk investors with long investment horizon, should instead invest in mid and small cap mutual funds.

What are the Advantages of Investing in Best Large Cap Funds?

Investing in best Large cap funds have the following advantages:

1. Stability to the portfolio: Since large cap funds invest in market leaders, they are more stable during economic downturns. Good quality large cap funds fall less than their peers and the benchmark even during bear runs. This brings stability to the overall mutual fund portfolio.

2. Long term wealth creation: Large cap funds are perfect for conservative investors to create long term wealth. These funds offer stable dividends, which are reinvested in the fund. This increases the overall fund return due to the power of compounding.

How to Select Best Large Cap Mutual Funds?

To select best Large cap mutual funds, you need to do two-fold analysis:

  • Quantitative Analysis
  • Qualitative Analysis

1. Quantitative Analysis: Quantitative analysis of best Large cap mutual funds include:

  • Fund’s performance in bull and bear markets
  • Fund’s performance against its peers and benchmark
  • Fund’s risk reward ratio like Sharpe ratio, Sortino, standard deviation over a 5-year period.

Best Large cap funds are funds which outperform their peers and benchmark in a bull market. In the bear market, best Large cap funds will fall less than their peers and the benchmark.

2. Qualitative Analysis: Qualitative analysis is very important when it comes to selecting best Large cap funds.

3. Quality of Management: A fund is as good as its management. Hence you should study the fund house, fund manager, schemes managed by the fund manager etc. before investing.

4. Portfolio Churning: Portfolio churning shows the number of times your fund buys and sells stocks. Fund managers often churn portfolios unnecessarily to increase their fund management fees. A very high portfolio churning ratio will simply increase your costs not returns.

5. Expense Ratio: Expense ratio is the fees paid by investors to the fund house for managing the fund. A high expense ratio reduces your portfolio returns. Best Large cap funds are funds with low expense ratio.

3 Things to Consider Before Investing in Best Large cap mutual funds

1. Risk Tolerance: The Net Asset Value, NAV of Large cap funds is more stable than mid and small cap funds. This makes Large cap funds more suited for low risk investors. So, before you invest in Large cap funds, you should evaluate your risk profile. If you are a high-risk individual with a long-time horizon, then mid cap funds and small cap funds will suit you better.

2. Investment Horizon: Investment horizon is very important while investing in large cap funds. If your time horizon is less than 1 year, then Large cap funds will not suit you. Large cap funds are generally suitable for investors with a medium to long time horizon. Best large cap funds have generated more than 12% return in a 5-10 year period.

3. Financial Goals: Before you invest in best Large cap funds, you must set SMART financial goals. When you invest as per your financial goals, you are more committed to investing for the long term.

How are best large cap mutual funds taxed?

Since large cap funds invest 80% of the corpus in equities, they follow equity taxation.

The holding period for large cap funds is 12 months.

  • If you sell your units before 12 months, then a short-term capital gains tax of 15% is applicable.
  • If you sell your units after 12 months, then a long-term capital gains tax of 10% above Rs 1 Lakhs is applicable.
  • If you sell your units after 12 months, but the gains are below Rs 1 lakh, then no tax is applicable.

Final Thoughts

Simply knowing the best large cap funds is not enough. You also need to know what is the right time to buy these funds. This minor detail is often overlooked by investors. This leads to investors investing in good funds but at the wrong time!

RankMF’s proprietary index MosDEX helps you invest in the right large cap fund at the right time.

To know if this is the right time to invest in Axis Bluechip Fund and other best large cap funds, open a FREE RankMF account today!

By Deepika Khude

The author is a Certified Financial Planner (CFP) with 5 years experience in Investment Advisory and Financial Planning. Her strength lies in simplifying complex financial concepts with real life stories and analogies. Her goal is to make common retail investors financially smart and independent.

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