Largecap mutual funds: 4 reasons why it is the best time to invest now

Stocks of largecap companies, which contribute 35% of India's GDP, and 74% of the profit pool among all listed companies, are likely to gain traction going ahead as largecaps have historically exhibited lower drawdowns and have recovered faster.

“Given the improving strength in our economy and businesses, there's a potential resurgence of Foreign Institutional Investors (FIIs) returning to India. Historically, a significant portion of FIIs' allocation gravitates towards largecap. Considering the currently attractive valuations in the largecap segment, we believe it's an opportune moment to step into the largecap space to capitalise on the potential upside,” said Navin Agarwal, MD & CEO, Motilal Oswal AMC.

MOAMC has launched Motilal Oswal Large Cap Fund, an open-ended equity scheme predominantly investing in largecap stocks. The NFO is open for subscription till January 31.


Here are 4 reasons why investing in largecap funds makes sense now:

1) Nifty 100 price ratios are now at multi-year lows vs other market cap baskets.

2) Largecaps are available at lower valuations when seen against mid, small and microcaps despite rising profit pool.

3) FII ownership in NSE500 is now at multi-year lows and below historical averages. With India's weight in EM indices at an all-time high, passive /active flows into EM funds could in turn drive significant foreign buying, Motilal said. Mutual funds have also seen outflows in largecaps, which may be about to change.

4) Largecaps have a strong track record when it comes to consistency. Largecaps have consistently performed over the years by being in the top 2 quartiles for 9 out of 11 years.

MOAMC fund manager Atul Mehra said valuations of largecaps are modest with trailing PE at 21.9, unveiling an ideal blend of quality and growth potential.

“Our new fund is an invitation to investors to A-C-E their game –leveraging our unique framework of ‘ACE’ – High ‘Active’ Share (~60-80%), High ‘Conviction’ (aimed at ~30 stock portfolio) 3) ‘Equal’ weight portfolio. This strategy positions us uniquely against the benchmark, promising a dynamic and actively managed portfolio that navigates market complexities with finesse,” Mehra said.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)