What are Large Cap Index Mutual Funds

Large Cap Index Funds follow the performance of various big-company stock indices like NIFTY 50, SENSEX, NIFTY Next 50, and NIFTY 100. They are inexpensive to invest in and aim to match the performance of the index they are based on.
EXPLORE FUNDS
Large-Cap Index Mutual Funds
EXPLORE FUNDS
4 mins read
01-July-2024

Interested in mutual fund investments? Large Cap Index Funds are worth considering. These funds track the performance of major large-cap indices such as NIFTY 50, SENSEX, NIFTY Next 50, and NIFTY 100. They are cost-effective and aim to replicate the returns of these indices.

These funds are a relatively safer form of equity investment, known for their ability to endure bear markets. With a good investment horizon, Large Cap Index Funds can provide stable and reliable returns. Let's dive deeper into understanding everything about Large Cap Index Funds in this blog.

What are large-cap funds?

Large-cap funds are mutual funds that invest in companies with a large market capitalisation. According to the Securities and Exchange Board of India (SEBI), large-cap companies are those that are ranked in the top 100 based on their market capitalisation. These companies are typically well-established and have a proven track record of performance. Large-cap funds are considered less risky than mid-cap or small-cap funds, as they invest in companies that are more stable and have a lower risk of failure.

What are index funds?

Index funds track specific market indices, like Nifty 50 and Sensex, and the fund managers passively manage these funds. By replicating the composition of these indices, these funds provide a straightforward way for investors to participate in companies without the complexity of constantly picking individual stocks.

Read more: What are Index Funds?

What is large-cap index mutual funds?

Large-cap index mutual funds are investment vehicles that replicate the performance of a specific large-cap stock market index. These funds follow various large-cap indices like NIFTY 50, SENSEX, NIFTY Next 50, NIFTY 100. They are cost-effective index funds designed to replicate the performance of the underlying index. Unlike actively managed funds, large-cap index mutual funds aim to match the returns of their chosen index rather than relying on the expertise of fund managers.

Top performing funds

Equity

Debt

Hybrid

Tax saver

View All
View all

Advantages of investing in large-cap index mutual funds

Investing in large-cap index mutual funds offers several advantages, including diversified exposure to established companies, lower risk compared to small-cap funds, and typically lower fees due to passive management. These funds aim to match the performance of major indices, providing steady growth potential and long-term stability, making them ideal for conservative investors.
  1. Stability and reliability
    Investing in large-cap index mutual funds provide stability to your portfolio, aligning with the robustness of these market leading companies. At the time of economic uncertainties, the stability of large-cap stocks can act as a shield for investors.
  2. Diversification
    These funds bring diversification to the table by investing across various large-cap stocks. Diversification is key to managing risk, ensuring a balanced performance even if individual companies face challenges. While the focus is on large-cap stocks, the variety within this category provides a well-rounded portfolio.
  3. Liquidity
    Index large-cap funds often have higher liquidity. This means buying or selling them is smoother, offering flexibility for investors to make decisions without causing significant market impact. The liquidity factor is crucial, especially for those who might need to liquidate their investments quickly.
  4. Long-term growth potential
    Large-cap index mutual funds offer significant long-term growth potential. By tracking well-established companies in major indices, these funds provide stability and steady performance over time. Investors benefit from the resilience of large-cap stocks, making these funds an attractive option for those seeking sustained growth in their investment portfolio. Read more about, What is portfolio diversification.

High-return mutual fund categories for smart investing

Equity Mutual Funds

Hybrid Mutual Funds

Debt Mutual Funds

Tax Saving Mutual Funds

NFO Mutual Funds

Multi Cap Mutual Funds

 

Some of the disadvantages of large-cap index funds

Here are some rephrased points highlighting the drawbacks of index large-cap funds:

 

  • These funds are limited in their ability to outperform the index by selecting top-performing stocks or steering clear of underperformers.
  • They lack the flexibility to adjust to shifting market dynamics, capitalize on emerging prospects, or mitigate potential risks.
  • Due to their adherence to index composition, they face constraints in diversifying their holdings across various sectors, themes, or investment styles.

 

Who should invest in large-cap funds?

  • Conservative investors: Large-cap funds are ideal for conservative investors who prioritise stability and are averse to high-risk investments. These investors typically prefer the safety and predictability offered by established companies with strong fundamentals.
  • Long-Term investors: Individuals with long-term investment horizons who seek steady growth over time may find large-cap funds attractive. These funds often offer consistent returns and can serve as a core holding in a diversified investment portfolio.
  • Investors seeking dividends: Large-cap companies often pay dividends regularly, making large-cap funds suitable for investors looking for a source of passive income. Dividend payments can provide stability and enhance overall returns, especially during market downturns.
  • Those looking for lower volatility: Large-cap stocks tend to be less volatile compared to mid-cap and small-cap stocks. Therefore, investors who prefer smoother investment journeys and wish to avoid sharp fluctuations in their portfolio value may opt for large-cap funds.
  • Beginners in investing: For new investors who are just starting their investment journey, large-cap funds can be a good entry point. They offer exposure to well-established companies, providing a relatively less risky introduction to the world of investing.

Things to consider before investing in large-cap index mutual funds

Listed below are a few important things to consider before investing in large-cap index mutual funds:

  1. Choose a reliable platform
    Select a reliable investment platform that suits your needs. Many online platforms like the Bajaj Finserv mutual funds platform offers user-friendly interface which is easy to navigate.
  2. Documentation and requirements
    Complete the necessary documentation, fulfilling KYC (Know Your Customer) requirements, a standard practice in the Indian financial landscape, ensuring a secure investment journey. KYC, is a regulatory requirement that involves verifying the identity of the customer.
  3. Understanding expense ratios
    Expense ratios represent the annual fees that investors pay for managing the fund. While index funds generally have lower expense ratios compared to actively managed funds, it is essential to understand and compare these costs before making an investment decision.

Read more: How to do KYC for mutual funds.

Conclusion

In conclusion, large-cap index mutual funds provide a compelling investment avenue for the investors seeking capital appreciation over long term. Navigating the financial market becomes more manageable with the strength of large-cap companies and the systematic approach of index funds. Consider investing in these as not just as an investment but also as a strategic move towards a more resilient financial future.

Essential tools for mutual fund investors

 

Mutual Fund Calculator

Lumpsum Calculator

SIP Calculator

Step Up SIP Calculator

SBI SIP Calculator

HDFC SIP Calculator

Nippon India SIP Calculator

ABSL SIP Calculator

Tata SIP Calculator

BOI SIP Calculator

Motilal Oswal Mutual Fund SIP Calculator

Kotak Bank SIP Calculator

Frequently asked questions

What kind of returns can I earn from large cap index?

Returns from large cap index funds are generally moderate and stable over the long term. While they may not provide explosive growth, they offer a balance between risk and return, making them suitable for conservative investors seeking steady capital appreciation.

Who should invest in large cap funds?

Large cap funds are ideal for conservative investors seeking stability and steady returns. Those with a lower risk appetite and a preference for established, large-sized companies may find large cap funds suitable for building a core portfolio.

What are large-cap index funds in India?

Large-cap index funds in India are mutual funds that aim to replicate the performance of a specific large-cap stock market index.

Which is better, a large-cap or an index fund?

The choice between a large-cap and an index fund depends on individual investment goals and preferences. Large-cap funds are actively managed and aim to outperform the market, while index funds passively track market indices.

Are index funds safe?

Index funds are generally considered safe investment options as they provide diversified exposure to the market and have lower expense ratios compared to actively managed funds.

What is the return rate of large cap index funds?

The return rate of large-cap index funds varies depending on market conditions and the specific index being tracked. Historically, they have provided returns in line with the performance of the underlying index.

Related Videos

Bajaj Finserv App for All Your Financial Needs and Goals

Trusted by 50 million+ customers in India, Bajaj Finserv App is a one-stop solution for all your financial needs and goals.

You can use the Bajaj Finserv App to:

  • Apply for loans online, such as Instant Personal Loan, Home Loan, Business Loan, Gold Loan, and more.
  • Explore and apply for co-branded credit cards online.
  • Invest in fixed deposits and mutual funds on the app.
  • Choose from multiple insurance for your health, motor and even pocket insurance, from various insurance providers.
  • Pay and manage your bills and recharges using the BBPS platform. Use Bajaj Pay and Bajaj Wallet for quick and simple money transfers and transactions.
  • Apply for Insta EMI Card and get a pre-approved limit on the app. Explore over 1 million products on the app that can be purchased from a partner store on No Cost EMIs.
  • Shop from over 100+ brand partners that offer a diverse range of products and services.
  • Use specialised tools like EMI calculators, SIP Calculators
  • Check your credit score, download loan statements and even get quick customer support—all on the app.

Download the Bajaj Finserv App today and experience the convenience of managing your finances on one app.

Do more with the Bajaj Finserv App!

UPI, Wallet, Loans, Investments, Cards, Shopping and more

GET THE APP

Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer:

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form:

(ii) carry customized/personalized suitability assessment:

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.