Top Large-Cap Mutual Funds for Investment in April 2025
During the ongoing financial year, investment advisors have been recommending large-cap mutual funds as a good option. Since the stock market has hit record levels, there is a hope of higher volatility.
Under such a situation, large-cap funds are being suggested for conservative investors who want relatively safer investment options to meet long-term financial objectives.
It is crucial to learn the basics of large-cap mutual funds and market conditions before arriving at an investment choice.
Why Consider Large-Cap Mutual Funds?
According to SEBI rules, large-cap mutual funds have to invest in the largest 100 companies based on market capitalization. Large companies tend to show higher stability during times of market volatility and are, therefore, a safer bet as an investment option in times of uncertainty. Investors looking for a relatively lower-risk mutual fund segment can consider large-cap funds for their investment portfolios.
Market Conditions Signal Volatile Period Ahead
Equity investors have been communicating concerns regarding increasing volatility and market risks. Issues of rising interest rates and inflation continue to remain challenges. Despite the fact that the Indian economy has shown stability with robust fundamentals, external global risks have been an important consideration. Because of such market sentiments, investors are recommended to take a cautious approach.
Despite these concerns, some analysts argue that large-cap schemes have been struggling in recent years. The introduction of the total return index by SEBI in 2018, along with stricter investment norms, has made it more challenging for these schemes to outperform their benchmarks. However, dismissing large-cap funds entirely may not be advisable. While these regulatory changes have posed challenges, large-cap schemes continue to provide inflation-beating returns with relatively lower volatility.
Selecting riskier mutual fund types for seeking greater returns without comparing the additional risks might result in negative results. Large-cap mutual funds have historically offered annualized returns of 10-12% for a long period of time. Investors who want to match their investment with the return of the market can also consider large-cap index schemes.
Recommended Top Large-Cap Mutual Funds for April 2025
For long-term investment consideration by investors, five to seven years of minimum horizon is advisable for large-cap mutual funds. Some of the best large-cap mutual funds to invest in April 2025 are:
- Axis Bluechip Fund
- Canara Robeco Bluechip Equity Fund
- Mirae Asset Large Cap Fund
- Baroda BNP Paribas Large Cap Fund
- Edelweiss Large Cap Fund
Performance Updates for April 2025
- Baroda BNP Paribas Large Cap Fund: Earlier in the first quartile, the scheme shifted to the second quartile in the previous month.
- Axis Bluechip Fund: Has been in the fourth quartile for the last 12 months.
- Canara Robeco Bluechip Equity Fund: Remained in the second quartile for the last two months, earlier being in the third quartile.
- Mirae Asset Large Cap Fund: It has been in the fourth quartile for the last 17 months.
There have been concerns raised about the underperformance of Axis Bluechip Fund.
Although recent performance has fallen behind its category and benchmark over the past three years, its long-term performance is good, with seven out of the past decade being better than its category and benchmark. Investors who are worried can think of shifting into another large-cap scheme, and those who can wait may opt to stick. The recent underperformance by certain large-cap funds has been blamed on the change from a growth strategy to a value-oriented approach in the market.
Methodology for Selecting the Best Large-Cap Mutual Funds The mutual funds are selected using a systematic assessment process, with various performance measures in mind:
1. Mean Rolling Returns: Computed on a three-year rolling basis.
2. Consistency Over Three Years: Measured by the Hurst Exponent (H), which identifies the fund’s NAV movement predictability.
- H = 0.5: This suggests a geometric Brownian motion, and it is hard to predict.
- H <0.5: Indicates a mean-reverting pattern, i.e., weaker stability of performance in the direction of earlier values.
- H > 0.5: Indicates a stable trend, with values closer to one showing greater stability in performance.
3. Downside Risk: Assesses the influence of negative return on the fund’s overall performance.
4. Outperformance: Measured based on Jensen’s Alpha, which measures the risk-adjusted performance of the fund compared to expected market performance.
5. Asset Size: Funds with a minimum asset size of Rs. 50 crore are considered for inclusion.
Conclusion
Large-cap mutual funds remain a popular choice among investors seeking stability in their equity portfolios. Although some schemes have failed to beat their benchmarks over the past few years, they are still a vital ingredient for long-term wealth generation. Investors need to keep a close eye on their selected funds and make decisions based on risk appetite and financial objectives. Periodic reviews and updates will enable investors to remain in sync with market movements and maximize their investment strategy.
