Top 5 best Large Cap Mutual Funds to invest in 2019

Large cap equity mutual funds are mutual fund schemes which invest at least 80% of their assets in large cap stocks. SEBI defines the top 100 stocks by market capitalization as large cap stocks. Large cap mutual funds tend to be less volatile compared to other types of equity mutual funds like multi-cap funds, midcap funds, small cap funds etc. They outperform (on a relative basis) in volatile markets, but may not be able to match midcap or small cap fund returns in bull markets. Large cap funds provide stability to your mutual fund investment portfolio. Financial planners usually recommend 60 – 70% of equity allocation to large cap, though allocations may be higher or lower according to your risk appetite.

Suggested reading – why should large cap mutual funds form the core of your mutual fund portfolio

In this blog post, we will discuss the top 5 large cap equity funds in 2019.

How we selected these funds?

Many investors invest in mutual funds based on recent performance. However, in our view this is a misguided approach to fund selection. Point to point performance or returns are biased by market conditions prevailing during a particular period. In our view, performance consistency across different market conditions (high, low, volatile etc) should be the most important selection criterion.

Our internal research, as well as findings of other mutual fund research analysts, show strong evidence of long term outperformance by the consistent performers. Rolling return is the best measure of performance consistency and our Top Consistent Mutual Fund Performers tool identifies the most consistent performers in each mutual fund category based on rolling returns. All the large top 5 funds in our selection are among the most consistent performers.

In addition, performance consistency, we have applied another filter to identify the outstanding performers in the large cap category. Using our Quartile Ranking tool, we identified the top quartile large cap funds, which were also among the most consistent large cap funds. A fund can generate high returns in favourable market conditions by taking more risk, but consistent performers who generate top quartile returns, do so through superior stock selection and intelligent sector allocations without taking too much risks. All the funds we selected using the above methodology have been rated 5 star or 4 star by Value Research. Here are the top 5 large cap funds in 2019 listed in alphabetical order.

You may also like to read why large cap equity mutual funds will always be a flavour for investing

Axis Blue-chip Fund

In the last 3 and 5 year periods (ending June 4^th 2019), Axis Blue Chip Fund gave 15.5% and 12.6% CAGR returns respectively. In the last one year, the scheme has given 13.3% return while YTD return is 11.1%. The chart below shows the annual returns of the scheme over the last 5 years.

The table below shows the 3 year rolling returns performance of this scheme over the last 5 years versus its benchmark index Nifty 50 TRI.

Value Research has a 5 star rating for this fund. ShreyashDevalker is the fund manager of this scheme. The scheme has an AUM of over Rs 5,100 Crores with an expense ratio of 2.11%

HDFC Top 100 Fund (erstwhile HDFC Top 200 Fund)

Launched in 1996, this was an old favourite with many investors. HDFC Top 100 fund was underperforming for some time but has made a strong comeback. In the last 3 and 5 year periods (ending June 4^th 2019), the scheme gave 16.6% and 11.3% CAGR returns respectively. In the last one year, the scheme has given 18% return while YTD return is 12%. The chart below shows the annual returns of the scheme over the last 5 years.

The table below shows the 3 year rolling returns performance of this scheme over the last 5 years versus its benchmark index Nifty 100 TRI.

Value Research has a 4 star rating for this fund. Industry veterans Prashant Jain and Rakesh Vyas are the fund managers of this scheme. They have excellent long term track record of wealth creation for investors. The scheme has over Rs 16,700 Crores of AUM with an expense ratio of 1.85%.

ICICI Prudential Blue-chip Fund (erstwhile ICICI Prudential Focused Blue-chip Equity Fund)

ICICI Prudential Blue-chip Fund is another investor favourite fund for nearly 10 years now. In the last 3 and 5 year periods (ending June 4^th 2019), the scheme gave 14% and 12.1% CAGR returns respectively. In the last one year, the scheme underperformed a bit on a relative basis (9.4% returns) but the long term track record of this scheme is outstanding. The chart below shows the annual returns of the scheme over the last 5 years.

The table below shows the 3 year rolling returns performance of this scheme over the last 5 years versus its benchmark index Nifty 100 TRI.

Value Research has a 5 star rating for this fund. Though there was a recent change in fund management of this scheme, current fund managers RajatChandak and AnishTawakley are highly experienced. The scheme has over Rs 21,800 Crores of AUM with an expense ratio of 1.85%.

Mirae Asset Large Cap Fund (erstwhile Mirae Asset India Equity Fund)

Mirae Asset Large Cap Fund is a recent joiner in the large cap funds club. Previously the scheme was a multi-cap fund (Known as Mirae Asset India Equity Fund), but fund has had over 80% of its stocks in large caps since July 2016. For a longer period of time the fund has had 75% (+/- 5 to 10%) in large cap stocks.

Fund manager, Gaurav Misra told us that, “The investment philosophy and approach do not change on this count (change to large cap). There have been no changes to the stock/holdings either, on this count.” Please read our interview with Mirae Asset Large Cap Fund Manager. In the last 3 and 5 year periods (ending June 4^th 2019), the scheme gave 16.5% and 15.7% CAGR returns respectively. In the last one year, the scheme has given 13.8% return while YTD return is 9.6%. The chart below shows the annual returns of the scheme over the last 5 years.

The table below shows the 3 year rolling returns performance of this scheme over the last 5 years versus its benchmark index.

Value Research has a 5 star rating for this fund. Industry veteran Neelesh Surana, along with Harshad Borawake and Gaurav Misra are fund managers of this scheme. They have a great track record of delivering alphas to investors. The scheme has over Rs 12,300 Crores of AUM with an expense ratio of 1.78%.

Reliance Large Cap Fund (Erstwhile Reliance Top 200 Fund)

Reliance Large Cap Fund is also an old investor favourite. The fund has delivered strong performance in the last 3 and 5 years, delivering 16.6% and 14% CAGR returns respectively. In the last one year, the scheme has given 13.8% return while YTD return is 9.6%. The chart below shows the annual returns of the scheme over the last 5 years.

The table below shows the 3 year rolling returns performance of this scheme over the last 5 years versus its benchmark index S&P BSE 100 TRI.

Value Research has a 5 star rating for this fund. Industry veterans Ashwani Kumarand Sailesh Raj Bhanare fund managers of this scheme. They have excellent track record of wealth creation across several different schemes they manage. The scheme has over Rs 12,700 Crores of AUM with an expense ratio of 2.05%.

Rolling Returns of Top 5 funds versus category

The chart below shows the 3 year rolling returns of the Top 5 large cap funds versus the large cap category over the last 5 years. The chart may look complicated at first glance but if you observe carefully, you will realize why we selected these funds from among their peers.

Are there other good large cap funds?

You may be surprised that some good performing large cap funds in your portfolio do not figure in this post. Selecting top 5 mutual funds is not easy. There are several other funds which have performed well both in terms of performance consistency and returns, but for the benefit of new / less experienced investors who may get confused if we had a larger selection, we decided to restrict our selection to Top 5 only by following a rigorous analytical approach (described earlier in the article) to select these 5 large cap mutual funds. If there are funds in your portfolio which have given good returns and performed consistently (you may want to check out consistent performers using our tool, Top Consistent Mutual Fund Performers, you should remain invested in them with a long investment horizon.

Conclusion

In this blog post, we discussed about the Top 5 best large cap funds. Based on our performance analysis methodology, we think that these funds should continue to deliver strong returns in the future. These funds are suitable for investors who have moderately high risk appetites. You can invest in these funds either in lump sum or SIP, depending on your financial needs but you should always have a sufficiently long investment horizon (at least 3 to 5 years). If you think you need help with your investment, you should always consult with a financial advisor.