Large Cap Funds are those mutual funds, which focus on investing primarily in large blue chip companies. Each of the fund houses have their own definition of deciding which stock falls in which category based on market capitalisation. But generally companies with a market capitalisation of Rs 1000 – 1500 crores and above are known as large cap companies. The major advantages of large cap funds is that they are less volatile than Mid and Small Cap funds and the near future of large cap funds can be more accurately predicted as they reflect the state of the economy.
Moreover, the construction of the BSE Sensex and NSE itself are based on market capitalisation of top 30 and top 50 companies of India respectively.
On the other hand, due to the relatively stable nature of these funds, the Large Cap funds have largely offered lower returns than mid cap or small cap funds. However, when compared in totality, large cap funds outperform all other funds by providing stability for risk averse investors looking for stable and generous returns. In volatile times it is advisable to invest in large cap funds.