An Investor’s Handbook To Invest In Best Large And Small-Cap Funds In India
Large and small-cap funds are known as open-ended equity mutual funds that primarily invest in large and small company stocks, respectively. As per the SEBI benchmark, large-cap organisations are the top 100 companies in terms of market capitalisation. In contrast, small-cap companies figure beyond the 250th rank with regard to market cap.
Now, you must be wondering which are the best large and small-cap funds, what are their features, who should invest, and why? Get all these queries covered below.
Best Large and Small Cap Funds in India
Here is a list of some of the top large and small-cap mutual funds as mentioned below.
Best Large-Cap Funds to Invest in
| Large Cap Fund Names | Features |
| Axis Bluechip Fund | AUM: Rs. 33,153.71 crores as of 30th Sep 2021 Expense ratio: 1.65% NAV (Net Asset Value): Rs. 53.45 as of 20th Oct 2021 Annualized 5 years return: 19.64% as of 20th Oct 2021 |
| Kotak Bluechip Fund | AUM: Rs. 3,346.14 crores as of 30th Sep 2021 Expense ratio: 0.86% NAV: Rs. 430.31 as of 20th Oct 2021 Annualized 5 years return: 17.03% as of 20th Oct 2021 |
| Invesco India Largecap Fund | AUM: Rs. 408.23 crores as of 30th Sep 2021 Expense ratio: 1.07% NAV: Rs. 52.94 as of 20th Oct 2021 Annualized 5 years return: 17.23% as of 20th Oct 2021 |
| Navi Large Cap Equity Fund | AUM: Rs. 107.02 crores as of Nov 16, 2021 Expense Ratio: 0.31% NAV: Rs. 40.47 1-year return: 42.68% as of 17 Nov 2021 |
| Canara Robeco Bluechip Equity Fund | AUM: Rs. 4,701 crores as of 30th Sep 2021 Expense ratio: .35% NAV: Rs. 47.55 as of 20th Oct 2021 Annualized 5 years return: 19.19% as of 20th Oct 2021 |
| Navi Large Cap Equity Fund | AUM: Rs. 106.48 crores as of 30th Sep 2021 Expense ratio: .31% NAV: Rs. 40.45 as of 20th Oct 2021 Annualized 5 years return: 15.50% as of 20th Oct 2021 |
Best Small Cap Funds to Invest in
| Axis Small Cap Fund | AUM: Rs. 7,302.98 crores as of 30th Sep 2021; Expense ratio: .37% NAV: Rs. 60 as of 20th Oct 2021; Annualised 5-years return: 22.78% as of 20th Oct 2021 |
| Kotak Small Cap Fund | AUM: Rs. 5,969.44 as of 30th Sep 2021; Expense ratio: .47%NAV: Rs. 184.67 as of 20th Oct 2021; Annualised 5-years return: 22.19% as of 20th Oct 2021 |
| Nippon India Small Cap Fund | AUM: Rs. 17,282.21 crores as of 30th Sep 2021; Expense ratio: .87%NAV: Rs. 90.20 as of 20th Oct 2021; Annualised 5 years return: 22.30% as of 20th Oct 2021 |
| SBI Small Cap Fund | AUM: Rs. 10,197.13 crores as of 30th Sept 2021; Expense ratio: .82%NAV: Rs. 113.49 as of 20th Oct 2021; Annualised return 5 years return: 23.01% as of 20th Oct 2021 |
| Canara Robeco Small Cap Fund | AUM: Rs. 1,621 crores as of 30th Sep 2021; Expense ratio: .47%NAV: Rs. 23.85 as of 20th Oct 2021; Annualised 2-years return: 59.32% as of 20th Oct 2021 (This fund’s inception is in 2019) |
Reasons to Invest in Large and Small Cap Mutual Funds
Before investing in large and small-cap funds, it is always important to know how they will benefit you. So, let’s find out the reasons below.
Large-Cap Funds
These mutual funds are perfect for steady wealth creation with regular dividends. They offer low-risk returns and can withstand a bearish market.
Small-Cap Mutual Funds
Such funds offer extremely high returns. At the same time, they are associated with high risk. They are suitable for investors who have a long-term investment horizon.
Who should invest in Large and Small Cap Funds?
When it comes to investing in mutual funds or any other investment avenue, there is no readymade solution. After all, the financial goals of all individuals are not the same. Hence, before investing in small mutual funds, you must check whether the objective of the fund is in line with your financial goal.
That said, there are other aspects, such as risk appetite, that you must take into account before deciding whether to invest in large and small-cap funds. We’ll discuss these factors in detail below.
Large and Small Cap Funds Features
Here is the list of features of large and small-cap funds, as mentioned below.
Large Cap Mutual Fund Features
- Such funds invest in large-cap stocks
- Large-cap funds are less riskier as they invest in well-established companies
- Offers more stability in comparison to other types of equity funds.
- As per SEBI regulations, these funds invest at least 80% of their total assets in large-cap stocks.
- Fund managers find it convenient to pick stocks as information about large-cap companies is easily available.
Small Cap Fund Features
- Such funds invest in stocks with a market cap of less than Rs. 500 crore.
- Small-cap funds can offer higher returns than any other equity-oriented mutual fund scheme.
- These funds involve high risk as small-cap companies do not have adequate financial backing in most cases.
- They invest at least 65% of their total assets in small-cap stocks.
- Fund managers have to do a lot of research to choose the right stock.
Taxation in Large and Small, Large Cap Funds
Any capital gains made within a period of fewer than 12 months will fall under the short term capital gains (STCG) category. Under this category, you will get taxed at 15% on your earnings.
However, if you redeem the units after the completion of 12 months, the realised returns are termed long-term capital gains (LTCG). In this case, a flat tax rate of 10% is applicable. Nevertheless, note that you do not need to pay any tax for LTCG of up to Rs. 1 lakh.
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Things to consider before investing in Large and Small Cap Funds
Below are certain pointers to take note of before you plan your investment in such funds.
Be clear with your investment objective
As mentioned earlier, you must make sure that the objectives of the fund are in line with your financial goals.
Past performance
When choosing a small-cap or large-cap fund, you must take into account the past return of the schemes. By looking at the historical performance of a fund, you can get to know whether the scheme has been successful in generating returns for investors on a consistent basis.
Fund manager’s experience
This is very critical. A portfolio manager with vast experience can work wonders, while an amateur person may fail to achieve the objectives of the fund. So, while choosing a fund, make sure to check a fund manager’s credentials as well.
Expense ratio
This is another critical aspect to take into account while investing in such funds. The expense ratio is an annual fee that asset management companies (AMCs) charge to cover the expenses of the fund. Such expenses include brokerage fees, administrative costs, and others.
For both small and large-cap funds, you must consider the above pointers. Adding to this, you must assess your risk appetite before allocating your funds. After all, since these mutual fund schemes predominantly invest in equity and equity-related instruments, they carry high financial risk.
How to invest in Large and Small Cap Funds?
There are two separate ways to invest in large and small-cap mutual funds.
Offline mode
Through this process, you can simply invest through intermediaries, such as a broker or distributor. In case you want to invest on your own, you can visit the closest branch of the AMC of your fund. Please carry the necessary documents as mentioned below.
- Identity Proof
- Cancelled cheque
- Photos (Passport size)
- PAN Card
- Proof of address
Online investing mode
This is a more convenient way to invest in mutual funds by avoiding the hassle of looking for a broker or reaching out to the nearest branch. Technology has made such tasks easy and brought everything to our fingertips. You can simply explore fund houses, such as Navi Mutual Fund to know and compare various mutual fund schemes offered by them before investing.
Final Word
Large-cap and small-cap funds can generate decent returns over a long period of time. While large-cap funds offer more stable and low-risk returns, small-cap funds, on the other hand, offer higher returns but at a higher risk. Ultimately, it all boils down to what you want as an investor.
Frequently Asked Questions
Ans: Exit load comes into play when withdrawing the earnings before a pre-specified date. It gets calculated as a percentage of the NAV (Net Asset Value) of a specific mutual fund. Post redemption, the amount remaining after subtracting the exit load from your returns gets credited to your bank account.
Ans: No funds are completely safe. Neither large-cap, midcap or small-cap funds guarantee profits. But if the market scenario is favourable and the fund manager is competent, a fund may yield substantial returns. However, large-cap funds are less risky and offer lower returns as compared to small or mid-cap mutual funds.
Ans: Investors can opt for a regular plan if they choose to invest in large-cap or small-cap funds via third-party agents, such as brokers and distributors.
Ans: No, there is no lock-in period in such funds.
Ans: The role of fund managers is essential in the case of both large-cap and small-cap funds. At the end of the day, they are responsible for investing your money in the best stocks and tracking their performance over a period of time so that you get the best returns.
However, in the case of small-cap funds, the risk is higher as the companies are not as financially stable as large-cap organisations. Hence, fund managers have to do a lot of research and analysis to pick the right stocks for their portfolios. They have to be right at the top of their skills to achieve the objective of the fund.
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
