Which Is the Best SIP Investment: HDFC Top 100 Fund vs Nippon India Large Cap Fund
September 23, 2024 Mutual Fund
In a rising market scenario like that of 2024, investing through SIPs in mutual funds is a prudent approach that balances risk and reward. The benefits of rupee cost averaging, disciplined investing, and compounding, combined with the current positive market trends, make SIPs an excellent choice for investors looking to maximize their returns while minimizing risk.
Investing in mutual funds via the SIP route not only helps mitigate risks but also enhances the potential for capital appreciation, making it suitable for both conservative and aggressive investors.
The trend towards SIPs has gained momentum in 2024, with inflows reaching record levels. According to the Association of Mutual Funds in India (AMFI), SIP inflows surged to over Rs 23,547 crore in August 2024, reflecting a growing confidence among retail investors. The number of SIP accounts has also surpassed 9.61 crore, indicating a widespread acceptance of this investment vehicle as a reliable means to participate in the equity market.
However, making the best SIP investments is crucial for investors looking to build wealth over time while managing risk effectively. In an environment marked by market fluctuations and economic uncertainties, the right SIP can serve as a robust vehicle for long-term financial growth. By capitalizing on market opportunities, enhancing discipline, managing risk, and focusing on long-term wealth creation, investors can build a solid financial foundation that withstands the test of time.
[Read: SIP Contributions Surge: Investor Appetite for Growth Fuels Record Inflows]
Invest in Large Cap Mutual Funds via SIP Amidst Rising Market Scenario
As of 2024, the Indian equity market is experiencing a robust recovery fuelled by several favourable economic indicators and government initiatives. After navigating the challenges posed by global economic uncertainties and domestic inflationary pressures in previous years, the market has regained momentum, supported by strong corporate earnings growth and increased consumer demand.
In a rising market, large-cap mutual funds present an excellent opportunity for investors to achieve stable growth while managing risk. By leveraging SIPs, investors can benefit from disciplined, regular investments that help navigate market fluctuations. As the economy continues to recover, investing in large-cap mutual funds can provide a solid foundation for wealth creation, making them a suitable choice for both seasoned investors and newcomers alike.
Despite global economic uncertainties and regional challenges, the large-cap segment has demonstrated resilience and moderate growth, making it an attractive option for investors seeking reliable growth in an uncertain market.
[Read: 5 Top-performing Large Cap Mutual Funds of 2024 in India Over the Last 5 Years]
Having said that, investors may consider SIP in large-cap mutual funds to navigate market fluctuations and strengthen their portfolios.
Note: In my previous article I have covered the best SIP mutual funds under the large & mid-cap segment, you may consider reading ‘Best SIP Mutual Funds with High Returns: Quant Large & Mid Cap Fund vs Bandhan Core Equity Fund’
This article offers a detailed comparison of two popular large-cap mutual funds suitable for SIP investments, an analysis of their strategies, market performance, SIP returns over various time frames, risk factors, and suitability for different investors to help you make an informed investment decision.
HDFC Top 100 Fund is an open-ended equity scheme that belongs to HDFC Mutual Fund. It is one of the flagship schemes in the Indian mutual fund industry. Launched in September 1996, this large-cap equity fund primarily invests in companies with substantial market capitalization, focusing on the top 100 stocks listed on the Indian stock exchanges by market value.
The primary objective of the fund is to provide long-term capital appreciation by leveraging the growth potential of established large-cap companies. The scheme currently holds an AUM of Rs 37,783.08 crore (as of August 31, 2024).
# – Nippon India Large Cap Fund
Nippon India Large Cap Fund (formerly known as Reliance Large Cap Fund) is an open-ended equity scheme and belongs to Nippon India Mutual Fund. This fund focuses on large-cap stocks, investing at least 80% of its assets in companies with large market capitalization, typically those ranked in the top 100 by market value on the Indian stock exchanges.
Its primary objective is to generate long-term capital appreciation by investing in industry-leading companies that have demonstrated stability, growth potential, and resilience in volatile market conditions. Launched in August 2007, it is a popular large-cap scheme and currently holds an AUM of Rs 32,884.40 crore (as of August 31, 2024).
Investment Style and Philosophy:
– HDFC Top 100 Fund: follows a blended investment strategy that combines both growth and value investing. The fund managers seek out companies that not only demonstrate strong growth potential but also trade at reasonable valuations.
A hallmark of HDFC Top 100 Fund’s philosophy is its emphasis on capital preservation while generating growth over the long term. The fund managers carefully select companies with strong balance sheets, competitive advantages, and the ability to weather economic cycles.
– Nippon India Large Cap Fund: follows a more growth-oriented investment philosophy. The fund managers focus on companies that are positioned for future expansion and earnings growth. These are typically market leaders or dominant players in their respective sectors, with a strong potential for scaling operations, increasing market share, or capitalizing on emerging opportunities.
The fund’s strategy is to maintain a diversified portfolio with exposure to multiple sectors while focusing on growth-oriented stocks. They aim to hold on to these stocks through varying market conditions, believing that large-cap companies are better positioned to navigate economic downturns.
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Performance Comparison: SIP – XIRR Returns for both the schemes
Scheme Name XIRR (%) 6 Months 1 Year 3 Years 5 Years 7 Years 10 Years HDFC Top 100 Fund(G)-Direct Plan 42.11 37.78 28.50 26.31 21.18 17.89 Nippon India Large Cap Fund(G)-Direct Plan 38.88 39.46 31.20 29.02 23.23 19.57 Category Average – Large Cap 43.82 39.52 25.94 23.60 19.82 17.15 Benchmark – Nifty 100 – TRI 40.74 37.66 23.95 22.62 19.18 16.82 Data as of August 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)[Read: XIRR vs CAGR in Mutual Funds: Which is the Better Tool to Evaluate Returns?]
As we can see from the above table, the HDFC Top 100 Fund and Nippon India Large Cap Fund have both delivered impressive performances over the years, with each scheme showing strong returns across various time frames, which highlights their strengths in the Large Cap category.
The Nippon India Large Cap Fund outshines HDFC once again, delivering an impressive XIRR of 31.20%, outperforming both HDFC's 28.50% and the category average of 25.94%. This indicates that Nippon India has consistently chosen stocks that have outperformed the benchmark and category, suggesting a strong track record in selecting growth-oriented large-cap stocks over this medium-term horizon.
Nippon's higher returns across market cycles demonstrate its consistent ability to generate long-term growth, outpacing the category average and the benchmark. HDFC's returns, while slightly lower, are still respectable, showing strong compounding over time and indicating its suitability for investors seeking steady and reliable long-term returns.
Graph: Large Cap category average SIP Returns over different time frames
Data as of September 20, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)While both funds have shown strong performance, Nippon India Large Cap Fund has consistently outperformed HDFC Top 100 Fund over most periods, particularly in the medium to long-term horizon. Nippon's more aggressive growth strategy has resulted in higher returns, making it an attractive choice for investors with a higher risk appetite.
HDFC Top 100 Fund, however, remains a solid option for those seeking stability and moderate returns, especially over longer time frames. Both funds have proven their worth by cementing their position as high-performing large-cap funds.
This analysis only considers returns. Before making an investment decision, you should also evaluate the fund's expense ratio, portfolio holdings, and risk profile to see which aligns better with your investment goals.
Moreover, past performance should not be the only element, it's important to note that one may consider other factors like portfolio holdings, risk profile, and investment philosophy before making a decision.
[Read: Highest Return Mutual Funds in the Last 10 Years – Large Cap (Bluechip) Fund Category]
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Portfolio Composition: Asset Allocation of Schemes
Both HDFC Top 100 Fund and Nippon India Large Cap Fund are popular choices for investment in the large-cap segment, but their asset allocation strategies differ slightly.
Scheme Name Large Cap % Mid Cap % Small Cap % Nippon India Large Cap Fund 82.39 9.91 6.50 HDFC Top 100 Fund 98.79 3.17 – Data as of August 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)HDFC Top 100 Fund has an overwhelmingly high allocation of 98.79% to large-cap stocks, making it a pure-play large-cap fund. The minimal allocation to mid-cap stocks (only 3.17%) suggests that the fund is focused on minimizing risk by investing in stable, well-established companies with large market capitalizations. The fund does not allocate any of its portfolio to small-cap stocks, further reinforcing its conservative investment approach.
By concentrating its assets in large caps, the fund targets long-term stability and consistent returns, relying on the performance of market leaders that tend to be less volatile compared to smaller companies.
In contrast, the Nippon India Large Cap Fund adopts a slightly more diversified approach. While the fund still maintains a majority allocation to large-cap stocks (approximately 82.39%), it also includes 9.91% in mid-cap stocks and 6.50% in small-cap stocks. This distribution indicates a willingness to take on additional risk for potentially higher returns.
The inclusion of mid-and small-cap stocks reflects the fund's growth-oriented strategy, aiming to benefit from emerging companies that may outperform large caps during bullish market phases. However, this also exposes investors to higher volatility compared to a purely large-cap-focused fund like HDFC Top 100 Fund.
The asset allocation strategy of these two funds reflects their differing philosophies. HDFC Top 100 Fund is more conservative, focusing on stability and minimizing risk by concentrating heavily on large-cap investments. Conversely, Nippon India Large Cap Fund strikes a balance between large-cap safety and mid-/small-cap growth potential, appealing to investors with a moderate risk appetite who are looking for a mix of stability and aggressive growth.
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Market Volatility: Risk profile of Schemes
The risk profiles of the HDFC Top 100 Fund and Nippon India Large Cap Fund reveal key insights into how each scheme balances volatility with returns.
Risk Ratio Nippon India Large Cap Fund HDFC Top 100 Fund Standard Deviation (3 Year) 13.74 13.15 Sharpe 0.36 0.33 Sortino 0.76 0.69 Data as of August 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)Looking at the standard deviation over the past three years, Nippon India Large Cap Fund has a higher SD of 13.74 compared to HDFC Top 100 Fund's 13.15. This indicates that the Nippon India Large Cap Fund tends to experience slightly more fluctuation in its net asset value (NAV) than the HDFC Top 100 Fund.
Although both funds are relatively stable due to their large-cap focus, investors in the Nippon India fund should be prepared for marginally higher price movements, especially during market volatility.
The Sharpe Ratio for Nippon India Large Cap Fund is 0.36, which is slightly higher than the HDFC Top 100 Fund's 0.33. This indicates that, on a risk-adjusted basis, Nippon India Large Cap Fund has delivered better returns relative to the risk taken, making it a potentially more attractive option for investors seeking higher rewards per unit of risk. However, the difference is minimal, and both funds appear to offer a relatively similar risk-reward profile.
Similarly, the Sortino Ratio, which is a variant of the Sharpe Ratio but focuses on downside risk, shows that Nippon India Large Cap Fund has a higher ratio of 0.76 compared to HDFC Top 100 Fund's 0.69. This suggests that Nippon India is slightly better at protecting against downside risk while maintaining performance, implying that the fund is more efficient in delivering higher returns without exposing investors to significant losses during market downturns.
Remember, this comparison is just to give you an idea about the risk profile of the two best large-cap mutual funds. Consider your risk tolerance and investment goals to determine which fund aligns better with your investment strategy.
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Top Holdings of the Schemes:
While both HDFC Top 100 Fund and Nippon India Large Cap Fund invest predominantly in the large-cap segment, their specific holdings and sector allocation reveal some key differences:
HDFC Top 100 Fund Nippon India Large Cap Fund Company % Assets Company % Assets ICICI Bank Ltd. 9.77 HDFC Bank Ltd. 8.96 HDFC Bank Ltd. 8.72 Reliance Industries Ltd. 6.15 NTPC Ltd. 6.02 ICICI Bank Ltd. 5.98 Larsen & Toubro Ltd. 5.71 ITC Ltd. 5.76 Bharti Airtel Ltd. 5.01 Infosys Ltd. 5.02 Infosys Ltd. 4.98 State Bank Of India 3.97 Reliance Industries Ltd. 4.56 Larsen & Toubro Ltd. 3.61 ITC Ltd. 4.21 Axis Bank Ltd. 3.57 Coal India Ltd. 3.83 Tata Consultancy Services Ltd. 3.19 Axis Bank Ltd. 3.64 Bajaj Finance Ltd. 2.99 Data as of August 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)The HDFC Top 100 Fund has a significant portion of its assets allocated to banking and financial services, with ICICI Bank Ltd. (9.77%) and HDFC Bank Ltd. (8.72%) being its top two holdings. Other key holdings include NTPC Ltd. (6.02%) and Larsen & Toubro Ltd. (5.71%), both of which are heavily involved in the infrastructure and energy sectors, indicating the fund's inclination towards cyclical sectors that benefit from economic growth.
Notably, Reliance Industries Ltd. (4.56%) and ITC Ltd. (4.21%) show the fund's exposure to diversified conglomerates and consumer goods, which can offer resilience during market volatility. Overall, the HDFC Top 100 Fund leans towards a mix of financials, energy, and industrials, with a balanced allocation across high-growth and defensive sectors.
In contrast, the Nippon India Large Cap Fund presents a slightly different top-holding structure. HDFC Bank Ltd. (8.96%) and Reliance Industries Ltd. (6.15%) top the list, reflecting a strong focus on two of India's largest companies across the banking and energy sectors. However, Nippon India Large Cap Fund shows a more diversified spread across other sectors, with ITC Ltd. (5.76%) representing the FMCG space and Infosys Ltd. (5.02%) standing out in the technology sector.
Overall, Nippon India Large Cap Fund places a significant emphasis on financials, IT, and consumer goods, positioning itself to capture growth across key sectors in the economy.
HDFC Top 100 leans more towards energy and infrastructure sectors, while Nippon India Large Cap has broader exposure to consumer goods and public sector banks. This slight difference in sector allocation could appeal to investors based on their individual risk tolerance and market outlook.
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Expense Ratio of the Schemes
When comparing mutual funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here's a quick breakdown of HDFC Top 100 Fund vs Nippon India Large Cap Fund:
Scheme Name Direct Plan Expense Ratio Regular Plan Expense Ratio HDFC Top 100 Fund 1.00% 1.60% Nippon India Large Cap Fund 0.68% 1.58% Data as of August 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)As you can see, HDFC Top 100 Fund has a significantly higher expense ratio in both regular and direct plans. Even a small percentage point difference can accumulate over time and impact your returns. Whereas, Nippon India Large Cap Fund has a slightly lower ratio under the regular plan and significantly under the direct plan as compared to HDFC.
A higher expense ratio could have an impact on the investor's actual returns and thus, investors may consider Nippon India Large Cap Fund as a cost-effective option. Remember, a lower expense ratio translates to potentially higher returns over time, but a lower expense ratio should not be the only factor to be considered while investing in mutual funds.
[Read: How You Can Use a Mutual Fund Screener to Choose Mutual Funds]
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Suitability of Investors to the Schemes:
Both HDFC Top 100 Fund and Nippon India Large Cap Fund are suitable for investors looking for a diversified portfolio of large & mid-cap stocks. It's ideal for investors with a moderate risk appetite. The fund offers an opportunity for investors to invest in blue chip & emerging companies, providing a balanced approach to capital appreciation and stability.
HDFC Top 100 Fund is best suited for conservative to moderate investors who prioritize stability, consistent returns, and a value-based approach. Its track record of managing downside risk makes it a safer bet during volatile market conditions. For retirees or risk-averse individuals, this fund can serve as a core holding in their portfolio due to its focus on high-quality large-cap stocks.
Nippon India Large Cap Fund is ideal for investors with a higher risk appetite, looking for potentially higher returns by investing in growth-oriented companies. This fund performs well in bull markets but may exhibit more volatility during market downturns. Investors looking for higher growth prospects within the safety of large-cap companies, and those willing to ride out short-term market fluctuations may find this fund appealing.
Both funds cater to different investor profiles, making it crucial for individuals to align their choices with their risk tolerance, investment goals, and time horizons.
To conclude…
Selecting the right mutual fund for a Systematic Investment Plan (SIP) can greatly influence the growth of your investment portfolio. Incorporating SIPs in either of the above-mentioned funds can enhance your investment strategy.
Whether you choose the aggressive growth potential of Nippon India Large Cap Fund or the stability of the HDFC Top 100 Fund, a disciplined SIP approach will help you build wealth over time and achieve your long-term financial objectives.
Ultimately, the best SIP investment in the large-cap segment hinges on your investment horizon and goals. Engaging with a SEBI-registered financial advisor can be incredibly beneficial, helping you tailor your strategy to align with your specific objectives.
As always, conducting thorough research and considering your suitability is crucial before making any investment decision. Additionally, maintaining a well-diversified portfolio across various market caps, sectors, and asset classes can effectively manage overall risk while maximizing growth potential. This balanced approach not only enhances your chances for robust returns but also provides a cushion during market fluctuations, allowing you to invest with greater confidence.
Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.
This article first appeared on PersonalFN here
