The Best Large Cap Mutual Funds to Invest in 2022

But finding the best large cap mutual funds for 2022 is usually a challenging exercise for most investors because the large cap mutual fund category in India has more than 33 large cap schemes and an Assets Under Management (AUM) of Rs 2,23,295 crores as of November 2021.

With all these 33 large cap mutual funds investing in the same 100 companies, it is important for investors to invest in only the best large cap mutual funds in 2022 to truly make a difference in their portfolio.

So, which are the best large cap mutual funds to invest in 2022? That is precisely what we will be answering in this article.

We at PersonalFN have shortlisted the four best large cap mutual funds for 2022. One of our recommended best large cap mutual fund for 2022 has generated a one-year return of 31.98% as of 4th January 2022.

Which best large cap mutual fund are we referring to?

Hold on, as we will be revealing our list of best large cap funds for 2022 shortly. But before that, let us take a look at the basics of large cap mutual funds, starting with what are large cap mutual funds.

In this article on the best large cap mutual funds for 2022

1. What are large cap mutual funds?

2. Advantages of Large cap mutual funds

3. Performance of Large cap mutual funds

4. List of 4 best Large cap mutual funds to invest in 2022

What are Large Cap Mutual Funds?

The Securities and Exchange Board of India (SEBI) defines large cap mutual fund as "an open-ended equity scheme investing a minimum 80% of its total assets in equity and equity related instruments of large cap companies".

Large cap companies, also known as blue chip companies, are the top 100 companies in terms of market capitalisation. Large cap companies generally have a market capitalisation of more than Rs 20,000 crore. Some of the most popular large cap companies include Reliance Industries Ltd, Tata Consultancy Services Ltd, Mahindra & Mahindra Ltd, HDFC Bank Ltd, etc.

So, a large cap mutual fund will use minimum 80% of its total assets to buy shares of such blue-chip market leaders. The fund manager has the freedom to invest the remaining 20% corpus in stocks of mid and small cap companies or debt instruments or simply hold the balance 20% in cash to take care of redemption pressures.

Let us take a look at the portfolio of one of the best large cap mutual funds to invest in 2022, Axis Bluechip Fund. The fund has a total AUM of Rs 33,519 crore as of 30th November 2021, off which 95.70% is invested in equities and the balance 4.30% is invested in debt instruments. Axis Bluechip Fund majorly invests in the following large cap companies -

Now you must have noticed the investment strategy here ... large cap mutual funds invest in market leaders that have a market capitalisation of more than Rs 20,000 crore. This investment strategy helps a large cap fund manoeuvre through market phases and tide over volatility. Apart from being market leaders, blue chip stocks (or companies) have well-established brand recall value, economic moats, competitive pricing, ethical, and efficient management, governance and compliance practices, solid balance sheet, surplus cash reserves. And most importantly, they enjoy the customer loyalty that helps them tide over the tough times.

Let us now take a look at the advantages of large cap mutual funds.

3 Key Advantages of Large Cap Mutual Funds

1. Stable returns amidst economic turmoil: The market leaders that large cap mutual funds invest in are companies with strong brand value and enjoy customer loyalty, which is especially crucial during market downturns. For e.g.: During the pandemic, households across the country reduced their expenditure to only essential items, but they did not shift their consumer preferences from their regular brands such as Colgate and Pepsodent, although cheaper alternatives like Dantkanti and Meswak were available.

This is the power of brand recall and customer loyalty. So, blue chip companies like Nestle, Hindustan Unilever Ltd, among others managed to post decent revenue numbers while everything around them was crumbling. Hence, large cap mutual funds are ideal for investors as they invest in companies that are able to manage economic downturns on the back of a strong balance sheet and customer loyalty.

2. Regular dividend payments: Generally, a company pays dividends from the excess profit that it generates. But since mid and small sized companies use their excess profits to reinvest in their own operations, mid and small cap mutual funds do not provide regular dividends. But this is not the case with large cap mutual funds.

Large cap companies have huge cash reserves, so even if they do not make profits in a particular year, they still have the bandwidth to pay dividends from their reserves and surpluses. So, large cap mutual funds are ideal for retirees or conservative investors looking to earn regular income from their portfolio.

3. Helps in investing in top large cap stocks with just one fund: For a moment, imagine that there are no large cap funds. Now what do you do if you want to invest in the top 100 companies listed on the exchange? You have no option but to buy individual stocks, which means your investment amount has to be in lakhs just to buy one share each of these 100 blue chip companies. But with large cap funds, you can invest in the best of these 100 companies with just Rs 100 via a systematic investment plan (SIP). Another big advantage of a large cap fund is that you have an expert fund manager who is responsible for picking the right large cap stocks with the aim to generate alpha for unitholders.

[Must Read: Best Mutual Funds for SIP]

Taxation of Large cap Mutual Funds

Large cap mutual funds are equity-oriented mutual funds and hence they follow equity taxation. The holding period for large cap mutual funds from a tax perspective is 12 months. So, if you sell your large cap fund units before 12 months, you pay short-term capital gains (STCG) tax of flat 15%.

On the other hand, if you sell your large cap fund units after completing one year, you pay a long-term capital gains tax of 10% with indexation, but only if your gains exceed Rs 1 Lakh in a financial year. If your long-term gains are below Rs 1 Lakh and you redeem after completing one year, then you do not have to pay any tax on these gains.

With the basics of large cap funds done, let us now move on to the list of the best large cap funds to invest in 2022. This list of best large cap funds for 2022 is a result of extreme scrutiny of each of the 33 large cap funds in India on both qualitative and quantitative factors. These four best large cap funds for 2022 have the calibre to generate consistently superior long term returns whilst curbing the downside risks during market downturns.

Let us take an in-depth look at each of these four best large cap mutual funds to invest in 2022, starting with the best performing large cap fund in the last one year, UTI Mastershare Fund.

Best Large Cap Mutual Fund to Invest in 2022 #1: UTI Mastershare Fund

UTI Mastershare Fund is truly the dark horse of the Indian large cap mutual fund space. The fund has generated a one-year return of 31.98% as of 4th January 2022, comfortably beating its benchmark, S&P BSE 100 - TRI's return of 27.84%. In addition to the short-term outperformance, the fund has also managed to beat its benchmark in the 5-year period with a return of 18.47% against the benchmark return of 17.99% as of 4th January 2022.

UTI Mastershare Fund invests in 50 stocks and is bullish on financial (27.82%), Technology (16.17%), and Healthcare sector (8.09%). The fund is bullish on stocks like Infosys Ltd (9.77%), HDFC Bank Ltd (8.79%), and ICICI Bank Ltd (8.78%). The chart below shows the performance of the fund against the benchmark as of 4th January 2022.

This best large cap fund was launched on 18th October 1986 and has generated a return of 17.89% since its launch. Supporting the dark horse theory, despite UTI Mastershare Fund consistently outperforming its benchmark, the fund is not a crowd favourite; as evident with a paltry AUM of Rs 9,356 crore against the AUM of Axis Bluechip Fund standing tall at Rs 33,519 crore (as of 30th November 2021). However, being one of the oldest funds in the large cap category, UTI Mastershare fund has a strong history of manoeuvring bull and bear market cycles, as evident in the table below.

As you can see, during the bear market period between 14th January 2020 to 23rd March 2020, the fund generated a negative return of (-) 34.10%, which was much better than the benchmark return of (-) 38.01%. So, the fund has successfully managed to curb its downside risk.

Our second-best large cap mutual fund to invest in 2022 is a crowd favourite, Mirae Asset Large Cap Fund.

Best Large Cap Mutual Fund to Invest in 2022 #2: Mirae Asset Large Cap Fund

Mirae Asset Large Cap Fund has generated the second highest return in the last one year in the large cap category. The fund has generated a return of 30.50% against a benchmark return (S&P BSE 200 TRI) of 28.50% as of 4th January 2022. In the long-term, i.e. a 5-year period, the fund has generated a return of 19.24% against a benchmark return of 18.36%.

Mirae Asset Large Cap Fund is well-diversified with an investment in 63 stocks with maximum exposure to financial (31.17%), Technology (16.46%), and Energy sector (8.99%). The chart below shows the performance of the fund against the benchmark as of 4th January 2022.

Mirae Asset Large Cap Fund has generated a return of 16.39% since its launch on 4th April 2008. The fund has a mammoth AUM of Rs 29,961 crores as of 30th November 2021. Despite such a high AUM, which can hinder entry and exits for fund managers, the fund has managed to outperform in a bull market and curb the downside in a bear market. Here is the performance of Mirae Asset Large Cap Fund across various bull and bear market phases.

Mirae Asset Large Cap Fund is one of the best large cap funds for 2022 and deservedly so, it has managed to outperform its benchmark during both bull and bear market phases. For e.g.: During the bull market phase between 23rd March 2020 and 9th November 2021, the fund generated a return of 71.59% against a category average of 66.91%.

The next fund on our list of best large cap mutual fund to invest in 2022 is Canara Robeco Bluechip Equity Fund.

Best Large Cap Fund for 2022 #3: Canara Robeco Bluechip Equity Fund

Canara Robeco Bluechip Equity Fund is another underdog of the large cap fund category. The fund has generated a one-year return of 27.94% against a benchmark return of 27.84% as of 4th January 2022, despite having an AUM of Rs 5,208 crore, one of the lowest in the large cap category. The fund has also performed well over a 5-year period with a return of 21.05% against a benchmark return of 17.99% as of 4th January 2022.

Canara Robeco Bluechip Equity Fund holds a well-diversified portfolio of 49 stocks with maximum exposure to financial (32.53%), Technology (15.81%), and Energy sector (9.51%). The chart below shows the performance of the fund against the benchmark as of 4th January 2022.

As evident in the graph above, Canara Robeco Bluechip Equity Fund has managed to outperform its benchmark across short-term (one-year) and long-term (since inception). Additionally, the fund has also managed to beat its benchmark across bull and bear market phases. Here's a quick look at the fund's exceptional performance delivered across bull and bear market cycles.

During the bull phase between 25th February 2016 and 14th January 2020, Canara Robeco Bluechip Equity Fund generated a return of 18.90% against a benchmark return of 17.29% and a category average of 16.29%. Whereas during the bear phase between 5th November 2010 and 20th December 2011, the fund fell by (-) 13.02% against a (-) 26.25%, i.e. almost a massive double drop suffered by the benchmark.

And our final best large cap mutual fund to invest in 2022 is the highly popular Axis Bluechip Fund.

Best Large Cap Fund for 2022 #4: Axis Bluechip Fund

Axis Bluechip Fund is one such best large cap fund that needs no introduction. It is an extremely popular large cap fund as evident from its massive AUM of Rs 33,518 crore as of 30th November 2021. Axis Bluechip Fund has generated a return of 24.02% against a benchmark return of 27.84% in the last one year as of 4th January 2022. The fund has also generated a return of 22.34% over a 5-year period (as of 4th January 2022), which is the highest in the large-cap category.

Axis Bluechip Fund holds a compact portfolio of 33 stocks with bullish views on financial (38.37%), Technology (17.71%), and services sector (9.93%). The fund invests 7.84% of its assets in Avenue Supermarts Ltd as part of its service sector component. The chart below shows the performance of the fund against the benchmark as of 4th January 2022.

The fund has underperformed its benchmark in the last one year, but overall, it managed to outshine its benchmark over the 3-year and 5-year periods. Let us see how the fund has fared against its benchmark during bear and bull market phases.