LARGE & MID CAP FUND – HOW THEY FIT IN
A large and mid-cap fund is a form of multi-cap fund. The difference is that the multi-cap fund includes allocations for large caps, mid-caps, and small caps. On the other hand, the large & mid cap funds only focus on the large caps and mid cap stocks and the small cap stocks are, at best, a peripheral addition to the portfolio. One of the basic things to remember is that the share of mid cap stocks in India has been gradually increasing. Consider these numbers. Between year 2000 and 2004, the mid-caps accounted for around 19.2% of the overall market. That share has gone up to 31.2% in the post 2020 period.
Clearly, this is an outcome of three things. Firstly, the mid cap stocks have captured much of the alpha and that has kept the retail and institutional interest robust in these stocks. Secondly, if you look at some of the large cap stocks like Eicher Motors or Havells today, they were all mid cap stocks about a decade back. It is this growth potential that makes them attractive. Above all, the formalization of sectors like retail, construction and logistics offers massive space for niche stories to dominate the mid cap space and also create outperformers.
LARGE & MID CAP STOCKS – UNDERSTANDING THE PORTFOLIO MIX
Let us first understand how these stocks are classified. All mutual funds adhere to the standard definition given by SEBI. Based on market cap rankings, the top 100 stocks are classified as large cap stocks. The stocks ranked 101 to 250 are ranked as mid-cap stocks and any stock ranked 251 and beyond becomes a small cap stocks. For the large & mid cap fund, the total universe will predominantly be the 250 stocks mentioned above. If you look at the cut-off in terms of market cap, then large caps are the ones with market cap of over Rs50,000 crore and mid-caps are the stocks with market between Rs17,500 crore and Rs50,000 crore. So, how will their portfolios look like?
Obviously, being an equity fund; the large & mid cap fund will have 70% to 100% allocated to stocks in the large cap and mid cap space. In reality, the equity exposure of these large & mid cap funds is well above 90% to ensure optimal returns over the long run. Within the equity mix, the large caps can range from between 35% to 65% while the mid-caps can also range between 35% to 65%. Historically, in India, mid cap stocks have done much better in rising markets while large cap stocks have done better in falling markets. Hence, the combination of these two categories ensures the safety and stability of large caps as well as the fleet-footedness and alpha potential of the mid-caps. By excluding the small caps, these portfolios tend to avoid the risk of illiquidity in their portfolios.
HOW LARGE CAPS AND MID-CAPS COMPARE AS INVESTMENT STORIES?
Here is a quick comparison of large caps and mid-caps in terms of their key characteristics and investment potential. Let us focus on the large cap stocks first. Large caps have easy access to capital and also easy access to talent. This enhances their ability to scale their operations rapidly. Generally, most large caps tend to have strong balance sheets that can survive the downturns in the market. In addition, the large caps can boast of certain pedigree in management, second line of defence and a track record of corporate governance. Most of them are industry leaders and enjoy stable businesses. Liquidity of the stock is also high. On the downside, large caps tend to get fully priced in the market, they are over-tracked by analysts and their growth and flexibility gets limited by size. Over time, they tend to become more of cash cows and less of growth businesses.
How do mid cap stocks shape up in comparison. Mid cap stocks offer the bigger alpha potential due to their focused business models and their ability to move fast. They have limitations on their scale, but that also means that they are frugal on capital usage. Their equity and debt levels tend to be very low. Mid cap story is about the formalization of the Indian economy post GST and that is likely to benefit mid-caps the most as more unorganized companies come into the mainstream. While large caps have dominated oil & gas, power, telecom, and metals; the mid cap space has unique sectors like healthcare, construction, logistics, defence etc. There are several sectors like IT, pharma, financial services, and capital goods where large and mid-caps co-exist to a large extent.
THE CASE FOR LARGE & MID CAP FUND IN INDIA
There are several justification for investors to adopt a large & mid cap approach to investing and a fund like the Whiteoak Capital Large & Mid Cap Fund.
HIGHLIGHTS OF THE WHITEOAK CAPITAL LARGE & MID CAP FUND NFO
Here are some key takeaways that investors should know about the NFO.
It must be noted that in the equity funds, the dividends are taxable at the marginal rate of tax while capital gains are taxed at concessional rates of 15% for short term capital gains and 10% for long term capital gains (above a threshold of Rs1 lakh of capital gains).
UNDERSTANDING THE LARGE & MID CAP FUND UNIVERSE IN INDIA
Here is a quick look at the other existing large & mid cap funds available in India at the current juncture. These fund have been ranked on 3-year returns.
Scheme |
NAV |
Return (%) |
Return (%) |
Return (%) |
Daily AUM |
Quant Large and Mid-Cap Fund |
94.96 |
20.35 |
29.14 |
18.82 |
1,249.77 |
HDFC Large and Mid-Cap Fund |
261.00 |
25.55 |
28.80 |
13.30 |
13,092.27 |
ICICI Prudential Large & Mid Cap Fund |
775.65 |
20.38 |
28.07 |
15.93 |
9,355.45 |
Motilal Oswal Large and Midcap Fund |
23.43 |
29.64 |
27.06 |
23.03 |
2,623.53 |
Mahindra Manulife Large & Mid Cap Fund |
22.62 |
21.87 |
26.58 |
23.26 |
1,523.02 |
UTI Large & Mid Cap Fund |
133.65 |
23.66 |
25.94 |
14.13 |
2,129.68 |
Bandhan Core Equity Fund |
105.50 |
25.09 |
25.00 |
15.03 |
3,112.43 |
SBI Large & Midcap Fund |
492.77 |
15.30 |
24.74 |
16.99 |
16,786.66 |
Navi Large & Midcap Fund |
33.17 |
14.92 |
23.28 |
16.24 |
265.58 |
Baroda BNP Paribas Large & Mid Cap Fund |
20.67 |
18.01 |
22.84 |
25.27 |
880.67 |
Edelweiss Large & Mid Cap Fund |
73.78 |
18.83 |
22.81 |
16.18 |
2,387.63 |
Kotak Equity Opportunities Fund |
279.83 |
19.86 |
21.97 |
16.87 |
16,168.74 |
Nippon India Vision Fund |
1,089.56 |
20.44 |
21.80 |
13.58 |
3,657.12 |
DSP Equity Opportunities Fund |
484.17 |
20.60 |
21.73 |
16.41 |
9,382.87 |
Sundaram Large and Mid-Cap Fund |
71.56 |
16.46 |
21.30 |
15.18 |
5,633.86 |
Mirae Asset Emerging Bluechip Fund |
126.93 |
18.19 |
21.11 |
22.40 |
29,673.07 |
Tata Large & Mid Cap Fund |
461.01 |
14.70 |
21.07 |
16.28 |
5,589.07 |
Union Large & Midcap Fund |
20.87 |
18.24 |
21.04 |
20.36 |
574.05 |
Invesco India Growth Opportunities Fund |
75.24 |
21.51 |
20.69 |
16.81 |
4,324.23 |
Bank of India Large & Mid Cap Equity Fund |
76.01 |
17.66 |
20.69 |
13.82 |
245.95 |
HSBC Large and Mid-Cap Fund |
20.76 |
22.66 |
20.42 |
17.06 |
2,454.90 |
Franklin India Equity Advantage Fund |
152.41 |
15.82 |
19.78 |
14.24 |
2,892.33 |
Canara Robeco Emerging Equities Fund |
209.25 |
13.41 |
19.16 |
20.33 |
18,486.17 |
LIC MF Large & Mid Cap Fund |
31.60 |
15.49 |
19.10 |
14.05 |
2,321.25 |
Aditya Birla Sun Life Equity Advantage Fund |
776.52 |
15.64 |
15.82 |
15.27 |
5,230.57 |
Data Source: AMFI
The above table shows the performance of the 25 large & mid cap funds we have in India. These funds already manage a substantial AUM of Rs1,60,040 crore. Over a 1 year period, the average returns have been around 19.3%, while the average CAGR 3-year returns have been 22.8%. This makes them among the best performing fund categories in India. If you look at these funds from inception, the average returns are close to 17.3% CAGR. Clearly, large & mid cap funds are a story and the Whiteoak Capital Large & Mid Cap Fund is timed right to capitalize on a big growth vector.
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Capital Services Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248, DP SEBI Reg. No. IN-DP-185-2016
ARN NO : 47791 (AMFI Registered Mutual Fund Distributor)
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.