With the frenzy running high in small- and mid-cap stocks, this might be a good time for investors to take stock of opportunities outside of these overheated areas. As valuations of mid- and small-cap indices become higher than those of large-cap indices and portfolios become too skewed, it may be time for investors with a moderate risk appetite to consider investing in large-cap funds.
Of course, most active large-cap funds have struggled to catch up (let alone beat) standard benchmarks such as Nifty 50 TRI and S&P BSE 100 TRI over the past few years.
But a handful of companies outperform large-cap indexes and do well over the long term.
In this regard, the Nippon India Large Cap fund has performed consistently over the years and investors can consider achieving their goals after 5-7 years. Investing under the SIP route will help average costs across the market cycle.
above average performance
The mid- to long-term performance of Japanese and Indian large-cap stocks has been healthy. Over the past five years, most active large-cap funds have underperformed their benchmarks, even on a point-to-point return basis.
However, Nippon India Large Cap has outperformed the S&P BSE 100 TRI over one, three, five and 10-year periods. Outstanding performance levels ranged from 2 to 9 percentage points. The fund’s compound annual return over the past 10 years is 18.3%, among the best among similar funds.
The SIP rate of return (XIRR) over the past 10 years is also impressive at 16.5%, according to Valueresearch.
Based on five-year rolling returns between September 2013 and September 2023, Nippon India Large Cap returned an average of 13.5%, which was higher than its benchmark return. These returns put it higher than peers such as Aditya Birla Sun Life Frontline Equity, UTI Mastershare, HDFC Top 100 and Franklin India Bluechip.
Looking at rolling five-year data from September 2013 to September 2023, the fund beat the benchmark half of the time. It managed to achieve returns of over 12% more than 67% of the time.
The fund has an upside capture ratio of 113.9, indicating that it has gained much more than the benchmark S&P BSE 100 TRI during the rally. Its downside capture ratio of 85.4 indicates that the fund’s NAV fell much less than the benchmark during the correction. A score of 100 means the fund is performing in line with its benchmark. This is based on data from 2020-2023.
healthy investment portfolio
The active large-cap fund’s stock selection is quite small, with only 100 stocks. This limitation causes many funds to focus solely on the index.
Japan-India large-cap companies have managed to balance sectors and stocks over the past few years. Given that this is the large-cap space, the fund takes a hybrid approach of value and growth picks.
As with most large-cap funds, banking and financial stocks dominate the portfolio and remain consistently above 30%.
The fund had a heavy allocation to the software sector following the COVID-19 outbreak and was able to profit from the sector’s sharp rebound. As valuations rose and business challenges became apparent in early 2022, the fund cut its exposure. FMCG stocks have also seen increased demand after relatively poor performance over the past two to three years. Petroleum products and construction are among other key holding sectors.
An interesting aspect of Japan India Large Cap is that it also invests slightly below the market capitalization curve. For example, it is mainly involved in leisure services (mainly hotels), because in the post-epidemic period and the opening period, people are eager to restart work-related travel, vacations and visits to tourist attractions, and send room rentals, there has been a huge “retaliation” Spending and occupancy soared.
The fund’s typical approach is to identify the top two to three players in each segment and invest in those companies.
Nippon India Large Cap typically maintains a compact portfolio of around 55 stocks. It holds no cash positions and remains invested throughout market cycles.
Investors can consider this fund as part of their long-term holdings and take a systematic approach to investing.