mutual funds performanceThe correction in midcap stocks has cost not just midcap mutual funds. It has affected ‘Large & Midcap’ funds as well. While there is no consensus on when midcap stocks will see a revival, recent fund performance shows that even those investors that wanted to play safe with Large & Midcap funds have been caught in the downdraft.

In the last 1 and 3 year periods, for example, Largecap funds have done better compared to Large & Midcap funds and pure-play Midcap funds. We are not even going into the 12-15 month bloodshed in Smallcap funds. This scenario brings to the fore a very important thing that investors must understand. Large Cap funds may not give mind-numbing returns, but usually, are better wealth protectors than Mid Cap funds as well as Large & Midcap funds. Read on to know more:

Difference between Large Cap, Mid Cap and Large & Mid Cap funds

Before we begin looking at numbers, let us first clear some basics. There are over 10 equity fund categories in India. Out of them, Large Cap equity funds are the second biggest group. A Large Cap fund is one where at least 80% of the money is invested in stocks of Large Cap companies i.e. the top 100 companies by market capitalisation. There are 30 Large Cap funds as per AMFI, the MF industry body.

The 4th biggest grouping among equity funds is Mid Cap equity funds. A Mid Cap fund is one where at least 65% of the money is invested in stocks of Mid Cap companies i.e. the 101st to 250th companies by market capitalisation. There are 24 Mid Cap funds.

The Large & Mid Cap fund category is relatively smaller. This category of equity funds has a blended nature. At least 35% of its money is invested in Large Cap stocks and at least 35% is invested in Mid Cap stocks. There are 24 funds in this category.

Fund Performance

We at RupeeIQ looked at Large Cap, Mid Cap and Large & Mid Cap funds of same fund-houses to understand the divergence in performance. We looked at 30 fund-houses who have at least 2 of the 3 fund categories. The return data mentioned below is with respect to periods ended July 17, 2019.

Here are the 5 best Large Cap funds in last 1 year

Large Cap
Fund 1-Year Return (%)
HDFC Top 100 Fund 14.85
Reliance Large Cap Fund 11.6
Mirae Asset Large Cap Fund 9.51
Tata Large Cap Fund 8.71
BNP Paribas Large Cap Fund 7.45

It was quite evident that across fund-houses Large Cap funds in the last 1 and 3 year have done better than Mid Cap funds and Large & Mid Cap funds.

For instance, Aditya Birla Sun Life Frontline Equity Fund has generated 4.6% return in last 12 months when Aditya Birla Sun Life Mid Cap Fund has fallen by 5.6% while the ‘Large & Mid Cap fund’ Aditya Birla Sun Life Equity Advantage Fund had declined by 4.1% due to 41% midcap exposure. Over a longer period say, 3 years, Aditya Birla Sun Life Frontline Equity Fund has given 9% return compared to 6% by Aditya Birla Sun Life Mid Cap Fund and 7.5% by Aditya Birla Sun Life Equity Advantage Fund.

In case of Edelweiss MF, the Edelweiss Large Cap Fund has given 1.65% and the Edelweiss Large & Mid Cap Fund has eeked out 0.74% in last 1 year period, but they are much better than the 5.5% loss in Edelweiss Mid Cap Fund. You can see this trend play in many AMCs including Franklin MF (Franklin India Bluechip Fund, Franklin India Equity Advantage Fund and Franklin India Prima Fund).

Here are the 5 best Large & Mid Cap funds in last 1 year

Large & Mid Cap
Fund 1-Year Return (%)
Mirae Asset Emerging Bluechip Fund 11.31
Tata Large & Mid Cap Fund 10.65
SBI Large & Midcap Fund 8.01
HDFC Growth Opportunities Fund 6.42
Essel Large & Midcap Fund 6.29

Even in a tough market, certain fund-houses have delivered great returns. As against 5.4% returns notched up by Large Cap funds on an average in 1 year period, HDFC Top 100 Fund gave nearly 14.9%. Against 2.4% average returns given by Large & Mid Cap fund, HDFC Growth Opportunities Fund has given over 6.4%. But, HDFC Mid-Cap Opportunities Fund has lost nearly 6% in last 12 months when the average mid cap fund has fell by 3.2%.

In case of ICICI Prudential Bluechip Fund and ICICI Prudential Large & Mid Cap Fund, 1-year returns have been similar in 5-7% range with the ‘Large & Mid Cap’ fund posting relatively lower positive gains because of its 43% mid cap stock exposure.

So, the overall trend has been that Large Cap funds have done better than Mid Cap and Large & Mid Cap funds. But among the notable exceptions are funds from DSP Mutual Fund. For instance, DSP Top 100 Equity Fund has given just 2.1% return in last one year but ‘Large & Mid Cap’ fund DSP Equity Opportunities Fund has given 3.5%. DSP Midcap Fund has marginal losses (0.06%) in the same period. This can be explained by better stock selection in midcap stocks compared to peers. It is also interesting to note that Tata MF’s 3 funds i.e Tata Large Cap, Tata Large & Mid Cap and Tata Mid Cap Fund are individually in the top-5 club of each segment.

Here are the 5 best Mid Cap funds in last 1 year

Mid Cap
Fund 1-Year Return (%)
Tata Midcap Growth Fund 6.24
Reliance Growth Fund 4.05
Axis Midcap Fund 3.2
Kotak Emerging Equity Scheme 0.56
BNP Paribas Midcap Fund 0.15

We are ignoring comparisons with respect to Axis, Baroda, BNP Paribas, Canara Robeco, Pramerica, Essel, HSBC, IDBI, Mahindra, Motilal Oswal and Principal etc. which either don’t have funds in all the 3 categories, or have less than 1-year track record in any of the 3 funds.

RupeeIQ take – Thanks to Sebi recategorization of fund segments, many fund-houses will try to fill gaps in the product portfolio. Due to this, they will come out with product launches. Investors must remember that they have to understand the risk profile of funds before investing in them. Do not invest solely based on return potential. At times, the ability to arrest losses is also important.

Disclaimer: The article is only for informational purposes. Investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Author
Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on kumarsroy@rupeeiq.com