3 Best Large Cap Mutual Funds to Invest in 2023 – Top Performing Large Cap Mutual Funds in India

December 23, 2022 Mutual Fund

Large Cap Mutual Funds invest in market leaders that have the ability to generate stable returns even amidst stock market chaos. So, as a mutual fund investor, large cap mutual funds are a must in your portfolio.

But finding the best large cap mutual funds to invest in 2023 could be a challenging exercise for most investors because the large cap mutual fund category in India has around 30 schemes and an Assets Under Management (AUM) of Rs 2,50,958 crore as of November 30, 2022.

With all these 30 large cap mutual funds investing in the same 100 companies, it is important for investors to invest in only the best large cap mutual funds in 2023 to truly make a difference in their portfolio.

So, which are the best large cap mutual funds to invest in 2023? That is precisely what we will be answering in this article.

We at  PersonalFN have shortlisted the three best Large Cap Mutual Funds to Invest in 2023. But before we reveal our list of best Large Cap Funds for 2023, let us take a look at the basics of large cap mutual funds.

This article includes

• What are Large Cap Mutual Funds? 

• Why you should prefer Large Cap Mutual Funds in 2023? Advantages of investing Large Cap Mutual Funds? 

• What are the risks involved in Large Cap Mutual Funds? 

• Who should invest in Large Cap Mutual Funds? 

• How much to invest in Large Cap Mutual Funds? 

• How are Large Cap Mutual Funds taxed? 

• 3 best Large Cap Mutual Funds to Invest in 2023 

What are Large Cap Mutual Funds?

The Securities and Exchange Board of India (SEBI) defines large cap mutual fund as ‘an open-ended equity mutual fund investing a minimum 80% of its total assets in equity and equity related instruments of large cap companies’.

Large cap companies, also known as blue chip companies, are the top 100 companies in terms of market capitalisation. Large cap companies generally have a market capitalisation of more than Rs 20,000 crore. Some of the most popular large cap companies include ICICI Bank, Reliance Industries Ltd, Tata Consultancy Services Ltd, HDFC Bank Ltd, Infosys, HUL, etc.

So, a large cap mutual fund will use minimum 80% of its total assets to buy shares of such blue-chip market leaders. The fund manager has the freedom to invest the remaining 20% corpus in stocks of mid and small cap companies, overseas equities, or debt instruments, or simply hold the balance 20% in cash to take care of liquidity and redemption needs.

Examples of Large Cap Mutual Funds in India

AUM data as of November 30, 2022
(Source: ACE MF)

Why you should prefer Large Cap Mutual Funds in 2023? Advantages of investing Large Cap Mutual Funds?

The Indian equity market stood out in 2022 by outperforming most major global indices amid sharp rally in the latter half of the year. The S&P Sensex is now trading above the 60,000 level. This rally can be attributed to factors such as robust corporate earnings, resilient economic activities, inflation coming off from its peak, and strong participation from retail investors.

However, downside risk is likely to persist in 2023 due to fears of slowdown in global economic growth. It is expected that multiple headwinds such as the war in Ukraine, China’s zero-COVID policy and the resurgence in active cases, elevated inflation levels, and monetary tightening by global central banks will have significant impact on most economies.

With the valuations in the Indian equity market near the peak and given the various headwinds in play, it is important to be cautious about your equity investments. It is a good time to spread your equity allocation across market caps with higher allocation to well-managed Large Cap Mutual Funds.

As mentioned earlier, Large cap mutual funds invest in market leaders that have a market capitalisation of more than Rs 20,000 crore. This investment strategy helps a large cap fund manoeuvre through market phases and tide over volatility. Apart from being market leaders, blue chip stocks (or companies) have well-established brand recall value, economic moats, competitive pricing, ethical, and efficient management, governance and compliance practices, solid balance sheet, surplus cash reserves. And most importantly, they enjoy customer loyalty that helps them tide over the tough times.

During economic slowdown, Large Cap Funds tend offer stability and witness lower downside risk compared to Mid Cap Funds and Small Cap Funds. Thus, when you invest in Large Cap Mutual Funds you benefit from the steady growth of capital over the long run without exposing your portfolio to high risk.

Favourite stocks of Large Cap Mutual Funds

Data as of November 30, 2022
(Source: ACE MF)

What are the risks involved in Large Cap Mutual Funds?

Since Large Cap Mutual Funds invest in equities, they are prone to market fluctuations. However, the risk is relatively lower compared to its peers in the Mid-cap Fund and Small-cap Fund category. Moreover, Large Cap Fund may not generate extraordinarily high returns because large-sized companies already hold significant market share and therefore, they grow at a slower pace.

Who should invest in Large Cap Mutual Funds?

Large Cap Mutual Funds are suitable for investors looking for steady growth of capital over the long run through equities but do not want to assume very high risk. It is advisable to have a long-term investment horizon of at least 3-5 years when investing in Large Cap Funds.

How much to invest in Large Cap Mutual Funds?

With significant exposure to market leaders, Large Cap Mutual Funds are less likely to be impacted by economic slowdown and market correction. Therefore, these funds should ideally form part of the Core equity portfolio of every investor. However, the actual allocation in the portfolio will depend on various factors such as your financial goals, risk appetite, and investment horizon.

Conservative investors and investors with moderate risk appetite should ideally have higher allocation to Large Cap Funds (around 50-70% or more of their equity portfolio), and the balance can be in Mid-cap Funds, Value Funds, Flexi Cap Funds, etc.

On the other hand, aggressive investors can consider allocating 30-50% of their equity assets in Large Cap Funds.

Avoid investing in Large Cap Funds if you have a very short-term investment horizon of, say, 6 months, 1 year, or 2 years.

How are Large Cap Mutual Funds taxed?

Large cap mutual funds are equity-oriented mutual funds and hence they follow equity taxation. The holding period for large cap mutual funds from a tax perspective is 12 months. So, if you sell your large cap fund units before 12 months, you pay short-term capital gains (STCG) tax of flat 15%.

On the other hand, if you sell your large cap fund units after completing one year, you pay a long-term capital gains tax of 10% with indexation, but only if your gains exceed Rs 1 Lakh in a financial year. If your long-term gains are below Rs 1 Lakh and you redeem after completing one year, then you do not have to pay any tax on these gains.

3 best Large Cap Mutual Funds to Invest in 2023

With the basics of large cap funds done, let us now move on to the list of the best large cap funds to invest in 2023. You can also get this article in the form of a downloadable PDF, just click on the below image. This list of best large cap funds to invest in 2023 is a result of extreme scrutiny of each of the 30 large cap funds in India on both qualitative and quantitative factors. These three best large cap funds have the calibre to generate consistently superior long-term returns whilst curbing the downside risks during market downturns.

These high quality schemes have been carefully shortlisted using PersonalFN’s proprietary SMART Score Matrix that gives high weightage to both quantitative and qualitative parameters to identify true long term performers.

List of Best Large Cap Mutual Funds to Invest in 2023

Past performance is not an indicator for future returns
Data as of December 22, 2022
(Source: ACE MF)

Let us take an in-depth look at each of these three best large cap mutual funds to invest in 2023.

Best Large Cap Mutual Fund to Invest in 2023 #1: Canara Robeco Bluechip Equity Fund

Launched over a decade back in August 2010, Canara Robeco Bluechip Equity Fund is a relatively small-sized scheme in the Large-cap Fund category. It has recorded superior growth over the last few years and has recently caught the attention of investors. Over the last 5-years, Canara Robeco Bluechip Equity Fund has registered a compounded annualised growth of around 14.6%, as against about 12.4% CAGR delivered by its benchmark S&P BSE 100 – TRI index. This outperformance has come at a far reasonable risk when compared to the benchmark and category average; its risk-adjusted returns are currently among the best in the category.

Top portfolio holdings of Canara Robeco Bluechip Equity Fund

Data as of November 30, 2022
(Source: ACE MF, PersonalFN Research)

Canara Robeco Bluechip Equity Fund usually holds a fairly-diversified portfolio of about 45 to 50 stocks. As of November 30, 2022, the fund held 46 stocks in its portfolio spread across sectors. Index heavyweights like HDFC Bank, ICICI Bank, Infosys, Reliance Industries, and SBI currently find a place in the top portfolio holdings. In terms of sector, Banking & Finance, Infotech, Consumption, Engineering, Petroleum, and Auto form part of the fund’s core holdings.

Performance across market phases of Canara Robeco Bluechip Equity Fund

Past performance is not an indicator for future returns
Data as of December 22, 2022
(Source: ACE MF, PersonalFN Research)

During the market crash of 2020, Canara Robeco Bluechip Equity Fund managed to outperform the benchmark by a noticeable margin of 7.5 percentage points and the large-cap category average by over 4 percentage points. The fund has shown reasonable performance in the ongoing bull phase as well compared to its peers and has the potential to reward investors over the complete market cycle going forward.

Backed by a well-defined investment process, Canara Robeco Bluechip Equity Fund has the ability to timely pick quality names having high growth potential, and deliver market-beating returns in the long run.

Click here to read our detailed analysis on Canara Robeco Bluechip Equity Fund.

Best Large Cap Mutual Fund to Invest in 2023 #2: ICICI Prudential Bluechip Fund

Launched in May 2008, ICICI Prudential Bluechip Fund is one of the largest schemes in the Large Cap Fund category. The fund focuses on investing in the top 100 companies listed on the NSE in which the fund manager has high conviction. Over the past five years, the fund has appreciated at 12.1% CAGR, which is largely in line with the benchmark returns. ICICI Prudential Bluechip Fund has generated superior risk-adjusted returns for its investors, its Sharpe ratio is much ahead of the benchmark and the category average.

Top portfolio holdings of ICICI Pru Bluechip Fund

Data as of November 30, 2022
(Source: ACE MF, PersonalFN Research)

As of November 30, 2022, ICICI Prudential Bluechip Fund held a large portfolio of 70 stocks, which includes one overseas equity. The fund held its major exposure in index heavyweights such as ICICI Bank, Reliance Industries, HDFC Bank, Infosys, and L&T. In terms of sector, ICICI Prudential Bluechip Fund’s portfolio is skewed towards Banking and Finance along with significant exposure to Infotech, Petroleum, Engineering, Auto, and Pharma, among others.

Performance across market phases of ICICI Pru Bluechip Fund

Past performance is not an indicator for future returns
Data as of December 22, 2022
(Source: ACE MF, PersonalFN Research)

ICICI Prudential Bluechip Fund has displayed its ability to limit the downside risk for its investors during uncertain and highly volatile market conditions, while it has also rewarded with noteworthy returns during market rallies.

ICICI Prudential Bluechip Fund has a proven track record of identifying fundamentally sound stocks in the large-cap space and has displayed its ability to generate above-average returns when compared to its peers.

Click here to read our detailed analysis on ICICI Pru Bluechip Fund.

Best Large Cap Mutual Fund to Invest in 2023 #3: Mirae Asset Large Cap Fund

Mirae Asset Large Cap Fund is one of the most popular schemes in the Large Cap Mutual Fund category. The prudent investment strategies followed by the fund have earned it the tag of being a consistent performer that has rewarded long-term investors well over the long run. Over the last 5 years, Mirae Asset Large Cap Fund has appreciated at a CAGR of around 11.8%, which is broadly in line with the returns delivered by the current benchmark Nifty 100 – TRI index. Its ability to deliver reasonable risk-adjusted returns has helped it to reward investors over the long run.

Top portfolio holdings of Mirae Asset Large Cap Fund

Data as of November 30, 2022
(Source: ACE MF, PersonalFN Research)

Mirae Asset Large Cap Fund invests in a well-diversified portfolio of about 50-65 stocks. As of November 30, 2022, the fund held 59 stocks in its portfolio. Its major exposure is in highly liquid large cap names like HDFC Bank, ICICI Bank, Infosys, Reliance Industries, and Axis Bank. In terms of sector, around 36.1% of the fund’s portfolio is currently allocated towards Banking and Finance stocks, followed by Infotech, Petroleum, Consumption, Pharma, and Auto, among others.

Performance across market phases of Mirae Asset Large Cap Fund

Past performance is not an indicator for future returns
Data as of December 22, 2022
(Source: ACE MF, PersonalFN Research)

Mirae Asset Large Cap Fund has not only delivered superior returns during market rallies but has also performed well during depressed market conditions. In the recent bull phase, it stands among the top performers in the category, though it has slightly trailed the benchmark.

The fund is nimble in its approach and has a history of taking timely sector bets which helps it to tackle market volatility and offer stability to the portfolio.

Click here to read our detailed analysis on Mirae Asset Large Cap Fund.

This completes our list of the three best large cap mutual funds to invest in 2023. The only thing left to do now is to invest in these best large cap funds and reap the benefits of investing in market leaders.

This article first appeared on PersonalFN here