As the stock market continues to experience volatility, many mutual fund advisors are recommending large cap funds as a relatively safer investment option for conservative investors. With the market reaching all-time highs and expected to face increased volatility, large cap mutual funds are seen as a prudent choice for those looking to achieve long-term financial goals.
Understanding Large Cap Mutual Funds
Large cap mutual funds are required by the Securities and Exchange Board of India (SEBI) to invest primarily in the top 100 companies by market capitalization. These large, established companies are typically more resilient to market downturns and are often market leaders. As a result, large cap funds are considered a safer bet during volatile periods compared to smaller-cap funds.
Current Market Conditions
Investors are currently grappling with rising market volatility, higher interest rates, and inflation concerns. Despite the relative stability of the Indian economy and its solid fundamentals, global uncertainties pose risks. This scenario has led advisors to suggest a cautious approach to investing.
Performance of Large Cap Funds
Recent trends indicate that large cap funds have struggled to outperform their benchmarks, especially since SEBI introduced the Total Return Index in 2018 and implemented stricter investment norms. However, dismissing large cap funds entirely might be premature. Despite the challenges, these funds still offer inflation-beating returns with relatively lower volatility compared to other categories.
Fund Performance Updates
For September 2024, here are some notable large cap mutual funds:
BNP Paribas Large Cap Fund: This fund has consistently performed well, remaining in the first quartile for the past seven months. It is a strong contender for investors looking for reliable large cap performance.
Axis Bluechip Fund: Despite being in the fourth quartile for the past six months, this fund has historically delivered strong returns. Over the past decade, it has outperformed its benchmark and category seven times. Although it has faced recent underperformance, it may still be a viable option for long-term investors willing to ride out current volatility.
Canara Robeco Bluechip Equity Fund: With a position in the third quartile for the last seven months, this fund offers a mixed performance but remains a significant player in the large cap space.
Mirae Asset Large Cap Fund: This fund has been in the fourth quartile for eleven months. While it has faced challenges recently, it has the potential to rebound given its past performance.
Investment Considerations
Investors should evaluate large cap mutual funds based on long-term performance rather than short-term fluctuations. If you are content with returns in the 10-12% range over the long term, large cap funds remain a solid choice. For those looking to match market returns, considering large cap index funds might be beneficial.
In conclusion, while large cap funds may not always lead the pack in terms of short-term performance, their stability and resilience in volatile markets make them a prudent investment choice for conservative investors.
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