Best Large & Mid Cap Fund: Motilal Oswal Large & Midcap Fund v/s Kotak Equity Opp Fund

The large & mid-cap mutual fund segment is gaining prominence as a prudent choice for investors due to its ability to balance across market segments. The Indian economy's focus on infrastructure, digital transformation, and manufacturing creates significant opportunities for mid-cap companies to grow, which large & mid-cap funds are well-positioned to capture.

For investors, the large and midcap market offers a balanced approach to portfolio construction. It allows them to participate in the stability of large-cap stocks while benefiting from the growth trajectory of mid-cap companies. This dual exposure can enhance long-term wealth creation and provide a cushion against market fluctuations. However, careful selection of stocks or mutual funds within this segment is crucial to navigating the associated risks, such as economic slowdowns or sector-specific challenges.

[Read: 3 Best Large & Mid Cap Funds for 2024 - Top Performing Large & Mid Cap Mutual Funds in India]

The Nifty Largemidcap 250 index is a comprehensive benchmark that captures the performance of the largest and most dynamic companies in the Indian equity market, spanning both the large-cap and mid-cap segments. In 2024, this index has emerged as a critical indicator of market trends, reflecting the robust growth and resilience of Indian corporates across diverse sectors.

The Indian equity market's large and mid-cap segments have shown remarkable performance and have continued to draw significant attention from investors, both domestically and internationally.

Despite global economic uncertainties and regional challenges, the large-cap segment has demonstrated resilience and moderate growth, driven by robust corporate earnings, expanding digital infrastructure, and government reforms aimed at bolstering economic activity.

The mid-cap segment has attracted significant interest due to its potential for higher returns compared to large caps. Companies in this category are often in a phase of rapid expansion and innovation, making them appealing to growth-oriented investors. Industries such as pharmaceuticals, technology, and consumer goods are well-represented in the mid-cap space.

Note: In my previous comparison, I have covered a comprehensive analysis of a few top performing large & mid cap mutual funds, you may consider reading -

HDFC vs. ICICI Prudential: Evaluating the Best Large & Mid Cap Fund for Your Portfolio

Best SIP Mutual Funds with High Returns: Quant Large & Mid Cap Fund vs Bandhan Core Equity Fund

This article provides an in-depth comparison of two popular large & midcap funds, analysing their investment strategies, performance, risk factors, and suitability for different types of investors, to aid you in making an informed investment decision.

# - Motilal Oswal Large & Midcap Fund

Motilal Oswal Large & Midcap Fund is an open-ended equity scheme that belongs to Motilal Oswal Mutual Fund. It is a well-established fund launched in October 2019 and currently has an AUM of Rs 6,840.21 crore (as of October 31, 2024).

The scheme aims to provide long-term capital appreciation by investing predominantly in large-cap and mid-cap companies. It aims to provide long-term capital appreciation by maintaining a balanced allocation between the stability of large-cap companies and the growth potential of mid-cap companies.

# - Kotak Equity Opp Fund

Kotak Equity Opp Fund is an open-ended equity scheme and belongs to Kotak Mahindra Mutual Fund. Launched in September 2004, it is a popular large & mid cap scheme that emphasizes the PSU segment and currently holds an AUM of Rs 25, 034.05 crore.

Kotak Equity Opp Fund is benchmarked against Nifty LargeMidcap 250 - TRI as a primary index. Kotak Equity Opportunities Fund aims to generate long-term capital appreciation by investing in a diversified portfolio of large and mid-cap stocks. The fund adopts a blend of growth and value investing, aiming for steady returns with controlled risk.

Investment Style and Philosophy:

Motilal Oswal Large & Midcap Fund: follows a bottom-up stock-picking approach, focusing on companies with strong fundamentals, competitive advantages, and scalable business models. The fund seeks to deliver long-term capital appreciation by blending stability and growth.

The portfolio emphasizes companies with high return ratios, strong competitive advantages, and a proven track record of earnings consistency. This disciplined investment strategy ensures that the fund captures opportunities across market capitalization segments while maintaining a focus on value creation.

Kotak Equity Opp Fund: adopts a diversified investment strategy, emphasizing growth-oriented companies with scalable business models and robust management. The fund seeks to capitalize on opportunities across various sectors by combining top-down and bottom-up approaches.

Its allocation strategy is designed to provide a healthy mix of stability from large-cap stocks and the growth potential of mid-cap companies, making it suitable for investors with a moderate to high-risk appetite.

• Performance Comparison: Rolling Returns

  Scheme Name	Absolute (%)	CAGR (%)
  	1 Year	3 Years	5 Years	10 Years
  Motilal Oswal Large & Midcap Fund(G)-Direct Plan	51.89	27.07	27.77	-
  Kotak Equity Opp Fund(G)-Direct Plan	40.07	22.80	22.82	19.04
  Large & Midcap - Category Average	40.63	21.90	22.00	17.93
  Benchmark - Nifty LargeMidcap 250 - TRI	39.74	21.68	21.99	17.83

  Data as of November 21, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  As we can see from the above table, both Motilal Oswal Large & Midcap Fund and Kotak Equity Opp Fund have outperformed their benchmarks and category average, across almost all timeframes. However, it's crucial to remember past performance is not a guarantee of future results.

  Motilal Oswal Large & Midcap Fund has quickly established itself as a high-performing fund in the large and midcap category, delivering exceptional returns over its relatively short track record. Despite having a shorter history compared to its peers, the fund's strategic focus on high-growth large and midcap stocks has been instrumental in its success.

  Over three years, the Motilal Oswal fund maintained strong momentum, delivering a CAGR of 27.07%, far exceeding the category average of 21.90% and the benchmark's 21.68%. Its five-year performance, with a CAGR of 27.77%, further solidifies its position as a top performer in its category.

  In contrast, the Kotak Equity Opportunities Fund, with a longer and more established history, has consistently delivered solid returns. The fund has gained significant returns, closely matched the category average but fallen short of Motilal Oswal's exceptional performance. Its three-year and five-year CAGRs, at 22.80% and 22.82%, respectively, surpass the category average yet remain behind Motilal Oswal's superior figures.

  However, the Kotak fund stands out in the long term, with a 10-year CAGR of 19.04%, outperforming the category average of 17.93% and the benchmark's 17.83%. This demonstrates its ability to deliver steady, compounding growth over an extended horizon, making it a reliable choice for investors focused on long-term wealth creation.

  The Motilal Oswal Large & Midcap Fund excels in delivering aggressive returns over shorter and medium timeframes, appealing to investors seeking high growth. Meanwhile, the Kotak Equity Opportunities Fund, with its robust long-term track record, offers consistency and stability, making it suitable for risk-averse investors aiming for steady returns over a decade or more.

  This analysis only considers returns. Before making an investment decision, you should also evaluate the fund's expense ratio, portfolio holdings, and risk profile to see which aligns better with your investment goals.

• Portfolio Composition: Asset Allocation of Schemes

  Both Motilal Oswal Large & Midcap Fund and Kotak Equity Opp Fund are popular choices for investments in the large & mid cap segment, but their asset allocation strategies differ slightly.

  Scheme Name	Large Cap %	Mid Cap %	Small Cap %
  Kotak Equity Opp Fund	55.92	36.09	5.47
  Motilal Oswal Large & Midcap Fund	33.88	34.32	25.92

  Data as of October 31, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  Both Kotak Equity Opp Fund and Motilal Oswal Large & Midcap Fund focus on investing in large & mid-cap stocks, but their approach to diversification within that sector differs.

  The Motilal Oswal fund demonstrates a balanced approach with a significant tilt toward mid-cap and small-cap stocks, while the Kotak fund follows a more conservative stance, emphasizing large-cap exposure.

  The Kotak Equity Opportunities Fund allocates approximately 55.92% of its portfolio to large-cap stocks, reflecting a focus on stability and well-established businesses. This high large-cap allocation ensures relatively lower volatility and consistent returns, catering to investors with a moderate risk appetite.

  In contrast, the Motilal Oswal Large & Midcap Fund adopts a more aggressive stance, with 34.32% of its portfolio in midcap stocks and an impressive 25.92% allocation to small caps. The relatively lower large-cap allocation of 33.88% indicates its inclination toward higher-risk, high-growth opportunities, particularly in the mid and small-cap segments.

  However, do note that Motilal Oswal Large & Midcap Fund holds a higher allocation to small-caps around 10.37% as compared to ICICI Pru Large & Mid Cap Fund. This suggests a potentially more aggressive approach targeting stability and growth.

• Market Volatility: Risk profile of Schemes

  The risk profiles of the Motilal Oswal Large & Midcap Fund and Kotak Equity Opportunities Fund highlight notable differences in their approach to managing volatility and delivering risk-adjusted returns.

  Risk Ratio	Kotak Equity Opp Fund	Motilal Oswal Large & Midcap Fund
  Standard Deviation (3 Year)	14.02	16.41
  Sharpe	0.28	0.33
  Sortino	0.57	0.64

  Data as of October 31, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  An investment with high volatility is considered riskier than an investment with low volatility; the higher the Standard Deviation, the higher the risk. The Standard Deviation is higher for Motilal Oswal at 16.41 compared to 14.02 for Kotak Equity Opportunities Fund. This indicates that Motilal Oswal exhibits greater fluctuations in its returns, reflecting a more aggressive investment strategy that seeks higher growth but comes with increased short-term risks. In contrast, Kotak's lower standard deviation demonstrates its relatively stable performance, appealing to conservative investors seeking less volatility.

  The Sharpe is higher for Motilal Oswal at 0.33 compared to 0.28 for Kotak. This suggests that despite its higher volatility, the Motilal Oswal fund compensates investors better for the risk taken. Its ability to generate superior returns relative to its risk profile positions it as a favourable option for investors willing to endure short-term fluctuations for potentially higher gains.

  Similarly, the Sortino Ratio, which focuses on downside risk by considering only negative deviations from the mean, is higher for Motilal Oswal at 0.64 versus 0.57 for Kotak. This indicates that Motilal Oswal has been more effective at managing and minimizing losses while delivering consistent performance, a crucial factor for investors concerned about mitigating downside risks during market downturns.

  Remember, this comparison is just to give you an idea about the risk profile of the two best large & mid cap mutual funds. Consider your risk tolerance and investment goals to determine which fund aligns better with your investment strategy.

• Top Holdings of the Schemes:

  While both Motilal Oswal Large & Midcap Fund and Kotak Equity Opp Fund invest across the market cap, their specific holdings and sector allocation reveal some key differences:

  Motilal Oswal Large & Midcap Fund		Kotak Equity Opp Fund
  Company	% Assets	Company	% Assets
  Trent Ltd.	6.25	HDFC Bank Ltd.	5.55
  Zomato Ltd.	5.82	Infosys Ltd.	4.00
  Kalyan Jewellers India Ltd.	5.78	State Bank Of India	3.60
  Samvardhana Motherson International Ltd.	4.64	ICICI Bank Ltd.	3.56
  Suzlon Energy Ltd.	4.12	Zomato Ltd.	3.36
  Bharti Airtel Ltd.	3.97	Bharat Electronics Ltd.	3.19
  Prestige Estates Projects Ltd.	3.95	Axis Bank Ltd.	2.87
  Mankind Pharma Ltd.	3.93	Larsen & Toubro Ltd.	2.68
  Inox Wind Ltd.	3.89	Linde India Ltd.	2.49
  Gujarat Fluorochemicals Ltd.	3.84	Sun Pharmaceutical Industries Ltd.	2.36

  Data as of October 31, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  Motilal Oswal Large & Midcap Fund exhibits a diversified and dynamic portfolio with a strong tilt toward emerging growth sectors. Its top holdings include Trent Ltd. (6.25% of assets) and Zomato Ltd. (5.82%), reflecting a strategic focus on consumer-driven businesses and technology platforms.

  The fund's sector allocation demonstrates its inclination toward high-growth industries, including retail, new-age technology, green energy, and real estate. The inclusion of stocks like Prestige Estates Projects Ltd. (3.95%) and Mankind Pharma Ltd. (3.93%) further diversify the portfolio across real estate and healthcare, ensuring a balanced approach. This diverse exposure aims to capitalize on India's rapidly growing sectors, catering to investors with higher risk tolerance and seeking aggressive growth.

  On the other hand, the Kotak Equity Opportunities Fund displays a more stable and balanced approach, with a significant allocation to established market leaders. Its top holding, HDFC Bank Ltd., accounts for 5.55% of assets, followed by Infosys Ltd. (4.00%) and State Bank of India (3.60%), highlighting the fund's focus on the financial and IT sectors.

  The fund also includes exposure to industrials and pharmaceuticals through stocks like Larsen & Toubro Ltd. (2.68%) and Sun Pharmaceutical Industries Ltd. (2.36%). This diversified yet relatively conservative allocation reflects the fund's strategy of investing in market leaders across stable and growth-oriented sectors.

  Both funds exhibit strategic sectoral diversification, reflecting confidence in the sector's stability and growth. However, Motilal Oswal Large & Midcap Fund leans slightly more towards emerging industries like green energy, real estate, and technology, while Kotak Equity Opp Fund shows a balanced strategy, prioritizing established players in banking, IT, and industrials for long-term stability and growth.

• Expense Ratio of the Schemes

  When comparing mutual funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here's a quick breakdown of Motilal Oswal Large & Midcap Fund vs Kotak Equity Opp Fund:

  Scheme Name	Direct Plan Expense Ratio	Regular Plan Expense Ratio
  Motilal Oswal Large & Midcap Fund	0.51%	1.77%
  Kotak Equity Opp Fund	0.50%	1.59%

  Data as of October 31, 2024
  Do note past performance is not an indicator of future returns
  The securities quoted are for illustration only and are not recommendatory.
  (Source: ACE MF, data collated by PersonalFN Research)  

  As you can see, Kotak Equity Opp Fund has a significantly lower expense ratio for both regular and direct plans. Even a small percentage point difference can accumulate over time and impact your returns.

  Motilal Oswal Large & Midcap Fund's higher expense ratio could have an impact on the investor's actual returns and thus, many may find Kotak Equity Opp Fund as a cost-effective option. Remember, a lower expense ratio translates to potentially higher returns over time, but a lower expense ratio should not be the only factor to be considered while investing in sectoral funds.

• Suitability of Investors to the Schemes:

  Motilal Oswal Large & Midcap Fund is an excellent choice for investors seeking aggressive growth in their portfolios over shorter to medium-term horizons. Its focus on a blend of large-cap, midcap and small-cap stocks allows it to capture growth opportunities effectively, making it suitable for those with a higher risk appetite.

  The fund's ability to outperform the category average and benchmark across one-, three---, and five-year periods showcases its potential for wealth creation, particularly for investors aiming to capitalize on market momentum. However, its shorter track record compared to peers might make it less appealing to those who prefer funds with proven long-term consistency.

  Kotak Equity Opportunities Fund is better suited for investors prioritizing stability and a proven performance history. Its consistent returns across multiple timeframes, make it an attractive option for long-term investors seeking steady compounding growth. This fund is ideal for individuals with moderate risk tolerance and a preference for a well-established portfolio strategy. It's particularly beneficial for investors with financial goals such as retirement planning or wealth preservation, where long-term consistency is key.

  Although these funds focus on large & mid-cap stocks, they are not immune to the inherent market risks. Ensure they complement your existing portfolio allocation to spread risk.

Future Outlook: Large & Mid Cap Segment

The future outlook for the large and midcap segment remains optimistic, supported by strong economic fundamentals and evolving market dynamics. India's structural reforms, including enhanced infrastructure development, digitalization, and financial inclusion initiatives, are expected to drive long-term growth in both large and midcap companies. Additionally, increasing foreign direct investment and robust domestic retail participation in equity markets are likely to sustain the momentum in this segment.

Large-cap companies are expected to continue delivering stable performance due to their strong financial metrics and leadership in key industries. They are well-positioned to navigate global uncertainties such as geopolitical tensions and inflationary pressures. Moreover, large-cap stocks will likely attract institutional investors seeking safety and liquidity during market volatility.

For midcap stocks, the outlook is particularly promising given their growth potential and exposure to emerging sectors. Companies in this segment are increasingly benefiting from India's push toward becoming a global manufacturing hub and the growing demand for innovative products and services. However, midcap stocks may face short-term volatility due to their higher sensitivity to macroeconomic shifts, requiring investors to adopt a long-term perspective.

Looking ahead, the large and midcap space is well-positioned to capitalize on India's economic growth drivers. Investors may benefit from this upward trajectory by incorporating large and midcap investments into their portfolios. However, investors must exercise prudence in selecting the right funds or stocks within this segment.

In conclusion, careful research and consideration of your risk tolerance are crucial before investing in any market-cap-oriented fund. Ultimately, the best choice of large & midcap funds depends on your investment horizon and goals. Consulting a SEBI-registered financial advisor can be invaluable to ensure optimal alignment with your specific investment objectives.

Remember, a well-diversified portfolio across market caps/sectors and asset classes may help manage overall risk while potentially benefiting from its growth potential.

Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.