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Nifty Large Cap Funds: Overview and Details

Nifty Large Cap Funds

Based on market capitalisation, investors have a choice to invest in large, mid, small, and multi-cap mutual funds. Large cap funds, also known as bluechip funds, invest in companies that are among one of the top companies in their industry. Mid cap funds invest in companies that have proved themselves to some extent but still have a long-term growth story. Small cap funds invest in emerging companies that have the potential to create substantial wealth in the future. This blog will focus on Nifty large cap funds.

What are Nifty large cap funds?

As per SEBI guidelines, the top 100 companies (1 to 100) in terms of market capitalisation are known as large cap companies. Mutual fund schemes that invest in these top 100 companies by market capitalisation are known as Nifty large cap funds.

The top 100 companies are among the top companies in their sector. They have demonstrated steady sales growth and superior profit growth in the past. These companies have good cash flows and pay dividends consistently. Large cap companies are also known as bluechip companies and have created good wealth for their investors in the past and are expected to continue to do so in the future as well.

Ways of investing in Nifty large-cap funds

There are two ways to invest in Nifty large-cap funds: active and index funds. 

An active large-cap fund usually has the Nifty 50 or the Nifty 100 Index as the benchmark. The fund manager invests the scheme money in the stocks that are a part of the benchmark index. The fund manager chooses which company shares to buy, when to buy, how much, and what price to buy. Similarly, the fund manager decides which company shares to sell, when to sell, how much, and what price to sell. The objective of an active Nifty large-cap fund is to outperform the benchmark index and generate alpha for its investors.

A passive large-cap fund usually has the Nifty 50 or the Nifty 100 Index as the benchmark. The fund manager invests the scheme money in all the index constituents as per their weightage in the index. The fund manager has no say in the buy and sell decisions. The objective of a Nifty index fund is to mirror the benchmark index and give similar returns to its investors. Passive funds are also known as index funds.

Who should invest in a Nifty large cap fund?

All equity mutual funds are risky. However, large cap funds are relatively less risky than mid and small cap funds. So, an investor who wants to invest in equity mutual funds with relatively lower risk than mid and small cap equity funds may consider investing in Nifty large cap funds.

In the long run, you can expect the Nifty large cap funds to give steady returns. Although they are risky, they have the potential to give inflation-beating high returns. When overall stock markets are falling, large cap funds usually fall lower than mid and small cap funds. Similarly, when stock markets are recovering, large cap funds are usually the first to recover.

Taxation of Nifty large cap funds

From a taxation point of view, any mutual fund scheme with a minimum of 65% of its total assets in equity and equity-related instruments is classified as an equity scheme.

  1. Short-term capital gains (STCG) tax: If you sell your equity mutual fund units within twelve months of purchase, the capital gain will be classified as short-term capital gain (STCG). The short-term capital gain (STCG) tax will be levied at 15%.
  2. Long-term capital gains (LTCG) tax: If you sell your equity mutual fund units after twelve months of purchase, the capital gain will be classified as long-term capital gain (LTCG). Every financial year, the first Rs. 1 lakh long-term capital gain will be exempt from taxation. The incremental long-term capital gain above Rs. 1 lakh will be taxed at 10%.

List of best Nifty large cap funds

Scheme name
(Direct Plan - Growth Option)
AUM
(Rs. crores)
1-year
(Absolute Returns)
3-years
(CAGR)
5-years
(CAGR)
Axis Bluechip Fund34,06915.87%18.28%18.25%
Canara Robeco Bluechip Equity Fund6,14117.13%20.15%17.08%
Mirae Asset Large Cap Fund30,34818.03%16.24%15.30%
Edelweiss Large Cap Fund30817.26%17.04%15.18%
Baroda BNP Paribas Large Cap Fund1,21317.25%18.29%14.97%

To start investing in Nifty large cap funds as per your appropriate asset allocation, download the Glide Invest App from Google Play Store or Apple App Store and get started.

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