As per Sebi mandate, large-cap mutual funds are mandated to invest in the top 100 companies by market capitalization. Large companies perform better in a volatile market as they can be market leaders and resilient to recessions. So, if you are looking for a relatively safer category of mutual funds, you should consider investing in large cap funds.
Volatile times are coming
Many equity investors are concerned about rising volatility and uncertainties in the market. A rising market, higher interest rates and inflation are disconcerting. The relative stability of the Indian economy and improving fundamentals support the market. However, one cannot be completely safe from the global scenario. For this reason, advisors are urging investors to proceed with caution.
Many investors and mutual fund analysts believe that large-cap schemes are losing their appeal of late. Ever since SEBI introduced the total return index in 2018 and stricter investment norms, large-cap schemes have struggled to outperform their benchmarks. However, completely writing off large-cap schemes could be a mistake. It is true that new benchmarks and stricter investment norms have made life difficult for these schemes. However, large-cap schemes can still continue to offer inflation-beating returns without too much volatility.
Investing in other categories of mutual funds for higher returns without paying attention to the additional risk could be a costly mistake for investors. If you are happy with the 10-12% returns offered by large-cap mutual funds over a long period, you should invest in them. If you want to match the market returns, you can learn about index schemes and invest in a large-cap index scheme.
If you are interested in investing in large-cap mutual funds to take care of your long-term financial goals, here are our recommended large-cap schemes for September 2024. You can invest in these schemes with a minimum investment horizon of five to seven years. Stay tuned for our monthly updates where we keep analyzing the performance of these schemes. We usually publish our updates in the first or second week of every month.
Best Large Cap Mutual Funds to Invest in September 2024:
Below are this month’s updates. BNP Paribas Large Cap Fund has been in the first quartile for the past seven months. Axis Bluechip Fund has been in the fourth quartile for the past six months. Canara Robeco Bluechip Equity Fund has been in the third quartile for the past seven months. Mirae Asset Large Cap Fund has been in the fourth quartile for 11 months.
Many investors have asked about the poor performance of the Axis Bluechip Fund in the last 12 months and whether they should continue to invest in the fund. We believe that equity mutual funds should be judged on their long-term performance. The fund has outperformed its benchmark and category seven times in the last 10 years. That is a great record. Of course, the fund has underperformed its benchmark and category in the last three years. If you are worried, you can choose another large-cap fund. If you want to give it some more time, you can continue to invest in the fund. Mutual fund analysts believe that funds that have followed the growth strategy have performed poorly in the last few years as the value strategy has gained prominence in the market.
Here is our methodology:
ETMutualFunds has used the following parameters to select the equity mutual fund schemes.
1. Moving average returns: Filmed daily for the past three years.
2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.
i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.
ii) When H is less than 0.5, the series is said to be mean-reverted.
iii) When H is greater than 0.5, the series is said to be persistent. The higher the value of H, the stronger the trend of the series.
3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.
X = Returns below zero
Y = Sum of all squares of X
Z = Y/number of days needed to calculate the relationship
Downside risk = square root of Z
4. Superior performance: It is measured by Jensen’s Alpha for the past three years. Jensen’s Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). A higher Alpha indicates that the portfolio’s performance has outperformed the returns predicted by the market.
Average returns generated by the MF scheme =[RiskFreeRate+BetaoftheMFScheme*{(AverageReturnOfTheIndex-RiskFreeRate}[RiskFreeRate+BetaoftheMFScheme*{(AverageReturnOfTheIndex-RiskFreeRate}[Tasalibrederiesgo+BetadelesquemaMF*{(Rendimientopromediodelíndice-Tasalibrederiesgo}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}
5. Asset size: For equity funds, the asset size limit is Rs 50 crore.
(Disclaimer: Past performance is no guarantee of future performance.)
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