Passive Large Cap Funds

The scheme's investment objective is to ensure long-term capital appreciation through a portfolio that predominantly invests in equity and equity-related securities of large- and mid-cap companies

While mid- and smallcap funds have outperformed, experts recommend maintaining a substantial allocation to largecap funds

ITI Mutual Fund said that it is at an "inflection point of 'J' curve growth," aiming to reach an AUM of Rs 1 lakh crore within the next five years, driven by India's robust macroeconomic fundamentals. A J-curve illustrates a trend that initially dips sharply before rising dramatically. As of July 2024, the company's AUM grew nearly 90 per cent year-on-year to Rs 8,763 crore. "India remains in a golden spot on the world map, with expected growth outpacing most global economies, presenting strong opportunities for the mutual fund industry," Rajesh Bhatia, Chief Investment Officer of ITI Mutual Fund told PTI. Bhatia said, "Given India's growth story, expanding at 7-8 per cent annually, it's the fastest growing among countries of its size and the most predictable. Many international observers would bet on India as having the highest growth potential over the next 5-10 years." "In this context, we are at an inflection point of 'J' curve growth, which positions us to scale dramatically.

Nifty is comfortably trading at 15-year average PE of 19.2x. As long as valuations are not frothy in large caps, there's not much to worry about, said Siddharth Vora of Prabhudas Lilladher

The majority of these investments are being directed towards the top 100-120 large cap companies in India. Interestingly, inflows into mid and small-cap funds have ceased since November 2023.

MOPW recommends a focus on Large Caps and Multicap funds for new equity investments

These awards are determined by a combination of risk-adjusted medium- to long-term performance track records and Morningstar's forward-looking rating for funds.

Mid and small-cap stocks could go through higher volatility, and one should be selective within them.

WhiteOak Capital Large & Mid Cap Fund will predominantly invest in Large and Mid Cap stocks with an aim to create a factor diversified balanced portfolio with high active share

Consider going for a passive fund

Subramaniam says pharmaceutical and healthcare sectors are reasonably valued and are showing incremental improvements in their balance sheets

Large-cap funds, by market regulator Sebi's mandate, must invest at least 80 per cent of their assets in large companies.

Large index funds continued to underperform in the first half of 2023 with 58 per cent large cap funds failing to beat their underlying indices and the overall underperformance being as high as 85.2 per cent. According to S&P Dow Jones Indices -- a leading index provider globally -- the underperformance rates for the domestic equity and bond mutual funds have been elevated over the past three- and five-year periods. Based on the varying performance of active managers across different fund categories, most equity large-cap funds failed to beat their benchmarks, with 58 per cent of actively managed funds underperformed on the S&P BSE 100 in the first half of 2023. In the fixed income fund category, while the BSE India government bond index rose 4.7 per cent in the first six months, fewer than one-sixth of active bond fund managers beat the benchmark during the period, with an underperformance rate of 85.2 per cent. But fewer funds performed badly as tenure, with underperformance

While the benchmark Nifty 50 rose 2.94% in July, it was outpaced by a 5.5% gain in the Nifty mid-cap 100 and an 8% increase in the Nifty small-cap 100. All three indexes hit record highs that month

The Assets Under Management for the large-cap equity category regained its peak, with assets totaling Rs 2,59,583 crore, as of June 2023. said Morningstar.

Such funds are holding 70% average allocation to large-caps

But investors who want the flexibility to alter their asset allocation may avoid these 3-in-1 funds

New launches within the passive-fund domain have made it possible to build a complete portfolio out of such products

Fund managers say PSUs look attractive as valuations are cheap and possibility of strategic sales offers room for value unlocking

India is going to be the next China. It will be a foreign flow magnet, says Sundaram Mutual Funds MD Sunil Subramaniam