Nippon India Large Cap Fund: A top performing large cap fund

Rs 1 lakh invested in Nippon India Large Cap Fund 10 years back would have multiplied more than 3.4 times (as on 31^st May 2021) and grown to a value of Rs 3.4 lakhs. The scheme outperformed its benchmark index S&P BSE 100 TRI. The CAGR return of the scheme over the last 10 years was 12.9%, while that of the benchmark was 10.2%.

Source: Advisorkhoj Research (as 31^st May 2021)

The systematic investment plan (SIP) performance of the scheme over the last 10 years is equally impressive. A monthly SIP of Rs 10,000 in Nippon India Large Cap Fund would have grown to over Rs 25 lakhs in market value (as on 31^st May 2021) with a cumulative investment of just Rs 12 lakhs. The annualized SIP return of the scheme was 14.21%.

Source: Advisorkhoj Research (as 31^st May 2021)

Relative performance of Nippon India Large Cap Fund over different periods

The chart below shows the trailing returns (annualized for more than 1 year periods) of Nippon India Large Cap Fund versus its benchmark index S&P BSE 100 TRI, large cap funds category and different asset classes (e.g. gold and fixed income) over different time scales (periods ending November 2019). You can see that, Nippon India Large Cap Fund outperformed its benchmark, category peers and other asset classes, like gold and fixed income across most periods.

Source: Advisorkhoj Research (as on 30^th June 2021)

You may like to go through the fund review of Nippon India Large Cap Fund which we did in November 2019.

Rolling Returns

As mentioned earlier in our blog, rolling returns is the most unbiased measure of mutual fund performance. The chart below shows the 3 year rolling returns of Nippon India Large Cap Fund versus the scheme category since the scheme inception. We have chosen to show 3 year rolling returns of the scheme because we think investors should have at least 3 year investment horizons when investing in equity funds. You can see that the scheme outperformed its benchmark most times across different market conditions in the 14 years since inception. This is indeed outstanding performance due to several reasons viz. the scheme is large cap where alpha creation is difficult compared to other categories (due to limited room for price discovery in large caps).

Source: Advisorkhoj Research (as on 30^th June 2021)

Let us now compare the 3 year rolling returns of the scheme with the large cap funds category, in other words, average returns of the scheme’s peers, across different market conditions over the last 5 years. This comparison in our view is more relevant for scheme selection from among its peers. You can see that Nippon India Large Cap Fund consistently outperformed the large cap category average during this period. Performance consistency is one of the most important attributes of good fund managers which enable them to create wealth for investors in the long term relative to their peers.

Source: Advisorkhoj Research (as on 30^th June 2021)

Over 5 year investment tenures, the average CAGR rolling returns Nippon India Large Cap Fund over the last 10 years were 13.6% and 16.5% respectively. The scheme gave 8%+ annualized 5 year rolling returns 80% of the times and 12%+ annualized 5 year rolling returns nearly 70% of the times over the last 10 years. We in Advisorkhoj recommend 5 year investment tenures for large cap funds.

About Large Cap Funds

SEBI classifies the top 100 stocks by market capitalization as large cap. Large cap stocks are much less risky (prices are less volatile) than midcap or small cap stocks. According to SEBI’s directive large cap schemes must mandatorily invest at least 80% of its assets in large cap; the remaining portion of the assets can BE invested in midcap and small cap stocks. SEBI’s mandate for large cap schemes restricts flexibility of fund managers in terms of stock selection across market cap segments to a certain extent, but at the same time ensures downside risk limitation for investors. As such these funds are suitable for first time investors or investors who do have high risk appetites.

About Nippon India Large Cap Fund

Nippon India Large Cap Fund (erstwhile Reliance Large Cap Fund) was launched more than 12 years back in August 2007. The scheme name was changed after the stake sale of Reliance Capital to its long term joint venture partner Nippon Life Insurance earlier this year. Nippon Life Insurance is one of the largest asset managers in the world and Nippon India Mutual Fund is largest foreign owed asset management company (AMC) in India. Nippon India Large Cap Fund has more than Rs 10,480 Crores of assets under management (AUM) as on 31^st May 2021. The expense ratio of the scheme is 1.78%. The scheme is helmed by veteran fund manager Shailesh Raj Bhan. Mr Bhan has been managing the scheme since inception.

Summary

Large cap funds provide stability and liquidity to your portfolio in different market conditions. Nippon India Large Cap Fund is one of the best performing large cap schemes over the last 10 years. This scheme is suitable for your long term financial goals like retirement planning, children’s higher education, children’s marriage, wealth creation etc. This scheme is also suitable for young or new investors. You need to have high risk appetite for this scheme. Investors should consult with their financial advisors if Nippon India Large Cap Fund is suitable for their investment needs.