Large-cap Mutual Funds: Should you invest in them now?

The year 2018 started with a good note for the Indian equity market, however, after the Union Budget, the markets have become volatile. Although at index level the fall is contained, the portfolio at the retail level is down by more than 30 per cent in many cases. Nevertheless, for investors who had put their faith in the large-cap stocks or large-cap dedicated funds are in a better position.

 In the last one month, on an average, all category of funds have generated a negative return, except for the large-cap, which remained marginally positive. The worst performers were small-cap dedicated funds. If we extend our study for three months, again large-cap funds remain the best performers giving an average return of 3.59 per cent. Nevertheless, if we take returns for over last three years, small-cap dedicated funds appear as the best performers.

What should you do now?

Despite all the correction we witnessed in small-cap and large-cap stocks and the funds dedicated to them, chances of them falling further cannot be ruled out. The reason being the valuation of small-cap and mid-cap stocks are still very high compared to large-cap stocks. Therefore, for the next six months to a year, we believe large-cap funds are better placed to park your funds. It is better suited for investors who are entering the market for the first time. They should, however, keep in mind that since large-cap mutual funds are less risky they offer lower returns compared to small-cap and mid-cap funds.