Classifying a company as small cap, mid cap or large cap are based on market capitalization and
may
change over any period of time. Market Capitalization
also known as market cap is simply the multiplication of the actual share price and total no. of
outstanding shares.
Market Capitalization = Actual share price * Total no. of outstanding shares.
Companies categorized as small cap, mid cap, or large cap funds are purely positioned in top
places
based on deep systematic research process of filtering
the funds, their past performance and portfolio analysis.
1. About Large Cap Funds:
Large cap funds are those funds that invest their corpus into companies with larger market
capitalization. They are described as reputable and strong players
offering sustainable and stable returns over a period of time.
Examples of large cap companies TCS, Infosys
Why to invest in Large Caps Funds?
Large cap funds are stable investment platforms and safe as they are already market leaders.
There
are top businesses which are less likely to go out
of business. Bing financially strong, they are more capable of withstanding bear
markets.
Scope of growth:
Despite their size, it’s hard for large cap companies to quickly seek
growth as they are already market leaders and having generally reached saturation.
Things to consider before investing:
Large cap funds become complex at times one may have to analyze the funds from different angles
before investing. Possessing financial knowledge on the
risk factors, returns, cost, financial goals, investment horizon, tax gains is mandate to ease
your
investments.
Past Performance: 2018-2019
Funds |
Returns |
1 Year (%) |
3 Years (%) |
5 Years (%) |
Axis Bluechip Fund - Direct Plan |
13.87 |
18.07 |
16.32 |
Motilal Oswal Focused 25 Fund - Direct Plan |
3.24 |
15.73 |
16.29 |
Reliance Large Cap Fund - Direct Plan |
9.73 |
19.21 |
18.44 |
SBI Bluechip Fund - Direct Plan |
3.3 |
13.96 |
16.87 |
2. About Mid Cap funds:
Mid cap as the name suggests lies between large cap and small cap funds, listed between 100th to
250th rank benchmark. They focus their investments on companies
with market capitalization in the middle range at an investable market.
Examples of Mid-cap companies: Biocom, AIA Engineering
Why to invest in Mid Caps?
Most investments are made into mid cap funds as the schemes here offer secular growth opportunities.
They are seen generating higher returns during the
market highs and have been the strong performers over the years.
Scope of growth:
Mid cap funds pay off well when invested in the right set up and show
higher growth aspects.
Things to consider before investing:
Mid cap funds offer unique growth opportunities for investors who follow the right investment
discipline. One need to consider components of risk factors
involved, investment horizon, and constraints during market highs.
Past Performance: 2018-2019
Funds |
Returns |
1 Year (%) |
3 Years (%) |
5 Years (%) |
Axis Midcap Fund - Direct Plan |
9.27 |
18.72 |
21.97 |
Invesco India Mid Cap Fund - Direct Plan |
4.49 |
18.21 |
22.76 |
Kotak Emerging Equity Scheme - Direct Plan |
-2.83 |
18.08 |
25.03 |
L&T Midcap Fund - Direct Plan |
-6.52 |
18.98 |
24.38 |
3. About Small Cap Funds:
Small caps funds are ones with relatively smaller market capitalization and are listed under 250th
rank benchmark. They are highly risky and volatile to a
business as compared to large caps or mid-caps. These funds are generally defined as the publicly
traded companies which are young and seek to expand aggressively.
Examples of small cap companies: Indian Cement, VIP Industries
Why to invest in Small Caps?
Small cap funds have been more popular over the last few years and can be highly rewarding over
longer tenure. Investing here can get you higher return benefits.
Scope of growth:
They grow faster witnessing accelerated revenues and profits with
significant margins, allowing investors to buy them aggressively.
Things to consider before investing:
One should be aware of risk factors, returns, cost, investment Horizons and financial goals before
making an investment. Investor need to be cautious of funds
which may exhibit investors to higher volatility.
Past Performance: 2018-2019
Funds |
Returns |
1 Year (%) |
3 Years (%) |
5 Years (%) |
HDFC Small Cap Fund - Direct Plan |
0.40 |
21.40 |
20.89 |
L&T Emerging Businesses Fund - Direct Plan |
-7.67 |
21.29 |
N/A |
Reliance Small Cap Fund - Direct Plan |
-6.90 |
18.66 |
26.10 |
SBI Small Cap Fund - Direct Plan |
-6.62 |
18.77 |
29.16 |
Information at your glance based on SEBI guide lines
Market Caps |
Bench Mark |
Large cap |
1 to 100th Rank |
Mid cap |
101 to 250th Rank |
Small Cap |
251st Rank Onwards |
General classification of funds in terms of market capitalization in India
Large Cap: Funds with market cap of Rs. 10,000 crores and more.
Mid cap: Funds with market cap between Rs. 2,000 and 10,000 crores.
Small cap: Funds with market cap of up to Rs. 2,000 crores.
Fund meter for various market caps:
Market Caps |
Risk Factor |
Return Potential |
Volatility |
Large cap |
Low |
Low |
Underperforms mid cap and small caps |
Mid cap |
Medium |
Higher returns in comparison to Large cap |
More volatile than large cap |
Small Cap |
High |
Higher |
Higher Volatile |
Large Cap, Mid cap and Small cap summary:
|
Large Cap Funds |
Mid Cap Funds |
Small Cap Funds |
Approach of Investment |
Invest in large cap companies whose assets are strongly weighed which are well
established and mark larger market capitalization |
They are the most promising category which offer value aided returns and good future
growth. |
It thrives and delivers faster growth amongst all the other peers. Companies here offer
high growth potential and aggressive expansion plans |
Risk factor and Returns |
Risky yet consistent, can underperform mid cap and small cap funds in short term |
High degree of volatility and can beat the benchmark during market highs |
Relatively high amount of risk for high returns, greater degree of volatility |
Best suitable for |
For investors seeing stable returns over long term |
For investors who seeking capital appreciation in longer term period |
Investors seeking superior return in medium to longer time period with high risk
appetite |