low risk funds

Best low-risk mutual funds

Mutual fund investments come in many formats, from short duration to long-term and even low-risk to high-risk options. Depending on individual preference and investment goals, one can opt for a mutual fund investment to generate appropriate returns. Here, we will explain the concept of low risk mutual funds and different types available within this category. 

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Multicap Funds

Best Multicap Funds

Most new investors are in a fix while selecting the right mutual fund to invest in. Whether they should opt for large-cap or mid-cap or small-cap? Are multi-cap or sectoral funds ideal for investment? These are the questions that new investors may face when they begin to explore the world of mutual fund investments. 

As a first step, investors must know about each of these categories along with some of their basic advantages and disadvantages. Important aspects like large-cap funds offer better stability to an investment portfolio, small-cap funds can provide exceptionally high returns while being risky, etc can be learnt before investing. 

One fund category that needs to be explored by investors is multi cap funds. These offer considerable flexibility since they are diversified equity funds investing primarily in stocks of companies with varying market capitalizations. Here are some of the important details around multi cap funds to aid investors in their investment related decision-making process.

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short term mutual funds

Best short term mutual funds for investing

Short term mutual funds
Home » Mutual Funds » Best Mutual Funds

Short Term Mutual Funds

Short-term mutual funds are a part of the debt category mutual funds. They invest in a range of debt securities such as corporate bonds, securitized debt, government securities, derivatives, bonds of financial institutions, and public sector undertakings (PSUs). They also have investments in money market instruments like T- bills, commercial paper, certificate of deposits (CDs), etc. The duration of the fund’s portfolio is between 1 to 3 years.

How do short-term mutual funds work?

Some short-term mutual funds offer higher returns as compared to bank deposits. The returns could range from 8 to 9%, depending on the assets included in the fund portfolio. Including the tax benefits, the returns on short-term mutual funds are higher than the post-tax returns offered by most other forms of investments.

Short-term mutual funds earn interest/ dividend income on the debt holdings in the portfolio. Besides interest income, short-term mutual funds give capital gains. Capital gains occur in the falling interest rates scenario. When the interest rates fall, the value of securities held by the mutual fund increase. However, there may be capital losses when the interest rates rise. The extent of gains or losses incurred is directly related to the fund’s duration and the interest rate movement in the said duration.

Taxation of short term mutual funds

There are mainly two ways in which investors earn by investing in short-duration debt mutual funds. 

  1. Through the dividend income, and 
  2. Capital gains. 

Dividend income is taxable as per the individuals’ applicable slab rates. Capital gains are taxable, too, but the rate depends on the length of the time that the investor holds the units of the debt funds. Here are the two broad tax categories on income from short term mutual funds:

  1. If the short-term mutual funds are retained for less than 3 years before redemption, the gains earned are termed short-term capital gains. Such gains made are taxable as per the investor’s slab rates. 
  2. If the short-term mutual funds are retained for over 3 years before the sale/ redemption, the profits incurred are called long-term capital gains. Long-term capital gains on these short-term mutual funds are taxed at 20 percent.

Investors also benefit from indexation in the case of long-term gains, which reduces the overall tax amount.

Who should invest in short-term mutual funds?

Before investing in short term mutual funds, investors can look through the below points which will help in understanding the suitability of these investments to individual financial goals:

  • Short term mutual funds belong to the debt category. Hence, they are suitable for investors who want a fixed income and, at the same time, enjoy a little better return from a bank FD (Fixed Deposit). Short term mutual funds earn interest income along with capital gains, so the returns are better than FD or liquid funds. Investors looking for an alternative to traditional instruments like bank FD can invest in these funds.
  • These funds have lower volatility than long-duration mutual funds. So investors who do not prefer volatile investments can also invest in such funds by taking moderate risk. Ideally, short-term funds are suitable for investors who are building their debt portfolio.
  • Investors should understand that they need to have a minimum holding period from 1 to 3 years in case they invest in short duration mutual funds. If the individual redeems funds within one year, he/she may witness capital loss if the redemption is made when the interest rates are rising. Therefore, the time horizon for short-term funds should be at least 1 to 3 years for getting the best returns out of them. 

Best short term mutual funds for 2021

Short-term mutual funds are gaining popularity. First-time investors or the investors who are starting building their debt portfolio are increasingly getting attracted to these funds. These funds are low in volatility, offer better returns than overnight, liquid, and ultra-short funds. So if you feel short term mutual funds are suitable for you, here are the best short term mutual funds you can invest in :

Kotak Bond Short Term Fund

About the Fund 

Kotak Bond Short Term Fund is a debt mutual fund scheme with 96.46% investment concentrated in debt. Of this, 42.28% is allocated to Government securities and 54.18% is invested in very low-risk securities. This fund has consistently beaten the category average returns. The three- year average returns of the fund are about 8 percent.

Inception Date May 02, 2002
Expense Ratio (Direct) 0.34%
Fund Manager Deepak Agrawal
Suitable For Investors who want to remain invested for 1-3 years and are willing to explore alternatives to bank deposits.

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
7.53% 8.11% 7.82% 7.67% 8.23%

IDFC Bond Fund-Short Term Plan

About the Fund 

This scheme from IDFC AMC seeks to generate returns by investing in debt and money market instruments. The portfolio of this fund is primarily a mix of short duration debt and money market instruments. The average portfolio maturity is anchored around 2 years. The fund aims to generate optimal returns over short to medium term.

Inception Date December 14, 2000
Expense Ratio (Direct) 0.30%
Fund Manager Mr. Suyash Choudhary
Suitable For Investors who are looking to diversify their portfolio with a mix of short duration debt and

money market instruments. The average portfolio maturity does not exceed around 2 years.

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
8.09% 8.18% 7.99% 7.70% 8.31%

Axis Short Term Fund

About the Fund 

Axis short-term fund primarily invests in a portfolio of money market instruments and high-quality debt securities. Investors can consider this fund if their investment horizon is between 1 to 3 years. This fund is rated as moderate risk. The fund has given healthy returns of around 9 percent since its inception. 

Inception Date January 01, 2013
Expense Ratio (Direct) 0.27%
Fund Manager Mr. Devang Shah
Suitable For Investors who are looking for stable returns with a low risk strategy and high liquidity. 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
9.18% 9.31% 8.83% 8.65% 8.90%

Kotak Money Market Fund

About the Fund 

The investment aim of Kotak Money Market Fund is to minimize interest rate risk linked to investments in fixed-rate investments. It predominantly invests in floating rate securities, money market instruments, and using appropriate derivatives. 

Inception Date November 01, 2006
Expense Ratio (Direct) 0.22%
Fund Manager Mr. Deepak Agarwal
Suitable For Kotak Money Market Fund is suitable for investors who are looking for short term investment of surplus funds for predictable returns and minimum risk.

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
5.22% 6.32% 6.93% 7.01% 7.76%

ICICI Prudential Money Market Fund

About the Fund

ICICI Money Market fund is an open-ended scheme that has 76.78% investment in Debt of which 22.98% in Government securities, 53.8% in funds invested in very low-risk securities. It aims to provide low risk and high liquidity combination through its investment choices. 

Inception Date January 01, 2013
Expense Ratio (Direct) 0.21%
Fund Manager Rahul Goswami

Nikhil Kabra

Suitable For Investors who want to invest for a very short term and are looking for alternatives to bank accounts/deposits.

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
5.91% 6.62% 7.11% 7.13% 7.81%

IDFC Banking & PSU Debt Fund

About the Fund

IDFC AMC launched this fund in March 2013. As the name suggests, this fund invests in the money market and debt instruments issued by scheduled commercial banks. The fund has generated consistent returns over the past several years. The returns are between 7 to 9 percent.

Inception Date March 07, 2013
Expense Ratio (Direct) 0.31%
Fund Manager Anurag Mittal
Suitable For Investors who are seeking optimal returns over short to medium term. Investment focus is predominantly in debt & money market instruments issued by PSU, Banks & PFI.

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
9.72% 9.69% 9.52% 8.40% 8.60%

Aditya Birla Sun Life Banking & PSU Debt Fund

About the Fund

This is an open-ended debt scheme primarily investing in debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and Municipal Bonds. The fund’s aim is to generate reasonable returns by focusing on short to medium term investments. 

Inception Date April 20, 2002
Expense Ratio (Direct) 0.68%
Fund Manager Kaustubh Gupta

Pranay Sinha

Suitable For Investors who are looking to fetch reasonable returns and liquidity over short term. 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
8.46% 8.89% 8.39% 8.46% 9.19%

Axis Banking & PSU Debt Fund

About the Fund

The scheme aims to provide stable returns by investing 92.9% investment in debt of which 5.99% in Government securities, 86.91% in funds invested in very low-risk securities. It acts as a good alternative to traditional fixed deposit and bank-related savings instruments.

Inception Date January 01, 2013
Expense Ratio (Direct) 0.31%
Fund Manager Aditya Pagaria
Suitable For Investors who are looking for regular income over short to medium term through Investment in debt and money market instruments issued by Banks, PFIs & PSUs.

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
8.78% 8.84% 8.92% 8.52% 8.68%

Conclusion

Investors can build a smart investment portfolio by including some of the best short term mutual funds which can help in minimising the overall risk exposure. However, before investing in any fund, investors must read through the scheme documents and other statistics to arrive at an informed conclusion. Now, investors can easily invest in mutual funds through the Finity app by downloading it on their smartphones.


Frequently Asked Questions

What are debt funds?
A debt fund is a mutual fund that invests money in fixed income instruments such as government and corporate bonds, treasury bills, commercial paper, certificates of deposit, etc.

How to invest in debt funds?
Investors can invest in direct plans of debt fund schemes through the respective asset management company. Investment can also be made in regular plans of debt fund schemes through a mutual fund distributor. One of the easiest modes of investment in debt funds is through the Finity app, since it is a paperless and hassle-free process.

What are short-term debt funds?
Short-term debt funds invest in bonds that have a maturity period of one to three years. These are ideal for low-risk investors who have a similar investment horizon.

How do debt funds work?
Debt funds aim to fetch returns by investing money in bonds and fixed-income securities. The funds look to earn an interest income by making such investments. The yields generated by investors are based on interest income. Debt funds invest in different categories of bonds, the prices of which can rise and fall depending on interest rate movements in the economy. If a debt mutual fund invests in a bond and its price rises because of falling interest rates, it will get additional income apart from the interest income.

When is the right time to invest in debt funds?
To protect against the volatility of the stock markets, investors must consider investing in debt funds. Including these in an investment portfolio can be beneficial to all investor types. Investors can start investing in debt funds and remain invested for the short to medium term depending on individual financial goals.


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Best equity mutual funds for 2021 – Finity

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Home » Mutual Funds » Best Mutual Funds

Best equity mutual funds for 2021 – Finity

Mutual Funds are becoming a popular investment avenue, especially for the new age investors across the country. The AUM of the mutual fund industry has seen a tremendous growth of around 17 percent. Even in this pandemic, where financial markets show signs of recovery, mutual funds have dominated the investment segment. More and more investors are recognizing the benefits of mutual funds and channeling their funds into different mutual fund schemes.

If you are looking to invest in the year 2021, here is a list of the best mutual funds under various categories.

Best Large Cap Mutual Funds

Large-cap mutual funds are funds that invest most of their corpus in companies with large market capitalisation. Investors looking for stable and sustainable returns with comparatively lesser risks can invest in such funds. The best large-cap funds for 2021 are as follows:

  • Axis Bluechip fund

Axis Bluechip fund is one of the top bluechip funds in the country. Axis bluechip fund invests in the blue-chip companies of India that are listed on the stock market. This fund has a diversified portfolio consisting of equity and equity-related instruments of large-cap companies. Investors looking to invest in bluechip companies can select this fund for long term wealth generation. 

Fund Name Category Minimum lump sum amount Fund Manager 
Axis Bluechip Fund Large Cap Rs. 5000/- Shreyas Devalkar

Hitesh Das

 

  • ICICI Prudential Blue Chip

This fund is a leading mutual fund scheme in the large-cap space. Investors looking for long term wealth appreciation can invest in this fund through a lump sum or a SIP route.  This fund from ICICI Prudential AMC has an AUM of more than 26000 crore rupees. The fund finds investment opportunities from the country’s economic growth, its structural changes by investing in equity and related securities. When it comes to returns, it has been a consistent performer and given returns around 15 percent since its inception.

Fund Name Category Minimum lump sum amount Fund Manager 
ICICI Pru Bluechip Fund Large Cap Rs. 100/- Rajat Chandak

Priyanka Khandelwal

 

Best Multi-Cap Mutual Funds

Multi cap mutual funds are funds that invest across market capitalisations. In other words, their portfolios have stocks of large-cap, mid-cap and small-cap companies. Investors looking for a diversified portfolio and less risk than a mid-cap or small-cap can invest in these funds. Here are the best multi-cap funds to invest in 2021:

  • UTI Equity Fund

This fund is from a multi-cap category. It invests across large, mid and small-cap companies focussing on a few selected sectors. UTI AMC’s fund has been a great performer in its category for the past 3 years, with returns of more than 14.5 percent in the same period. The fund size has been increasing every year and is around 15000 crore rupees. The fund has given consistent returns of about 16 % in the last five years. 

Fund Name Category Minimum lump sum amount Fund Manager 
UTI Equity fund Multicap Rs. 5000/- Ajay Tyagi

 

  • ICICI Prudential Large and Mid Cap Fund

As the name suggests, this scheme invests in equities of large and mid-cap companies. It has been more than ten years since this scheme was launched, and the fund size is around 2800 crores rupees. Investors looking to invest in multi-cap space can invest in this scheme for decent returns. 

Fund Name Category Minimum lump sum amount Fund Manager 
ICICI Pru Large & Mid Cap Fund Multicap Rs. 5000/- Sankaran Naren

Priyanka Khandelwal

 

Best ELSS or Tax Saver Mutual Funds 

Equity Linked Savings Scheme (ELSS) or a tax saver fund is a diversified equity scheme that offers tax benefits. Investments in an ELSS fund are eligible for the tax deduction of up to Rs. 1,50,000 under the section 80C of Income Tax Act, 1961. If you are looking to take the tax benefit, here are the best tax saver funds to invest:

  • Axis Long Term Equity Fund

Axis long term equity fund belongs to an ELSS (Equity Linked Savings Scheme) category. The fund has dual benefits. It gives an investor exposure in the equity markets, and the investment amount is eligible for the tax deduction under section 80C of the Income Tax Act. Thus, investors who want to avail the tax deduction and invest in equity can start a SIP in this scheme. The maximum amount of deduction available u/s 80C is Rs.1,50,000/-. An important thing to note here is that these funds that offer the tax benefit have a mandatory lock-in of 3 years i.e. investors cannot redeem their investments before the end of 3 years from the investment date.

Fund Name Category Minimum lump sum amount Fund Manager 
Axis Long Term Equity Fund ELSS Rs. 500/- Jinesh Gopani

 

  • ICICI Prudential Long Term Equity Fund

This fund from ICICI Prudential AMC is also from the ELSS or Tax saver category. The AUM of this fund is around 8000 crores rupees. The three- year returns of the fund have beaten the category average returns. The fund has given handsome returns of about 15 percent since the inception. Mr Sankaran Naren is the fund manager of this scheme.

Fund Name Category Minimum lump sum amount Fund Manager 
ICICI Pru Long Term Equity fund ELSS Rs. 500/- Sankaran Naren

Harish Bihani

 

  • ABSL Tax Relief 96 Fund

This is an equity mutual fund scheme started by Aditya Birla Sun Life AMC. It has been more than 10 years since this scheme was launched. This fund falls in the ELSS (Equity Linked Savings Scheme) category. Investors who wish to take exposure in equities and save tax can invest in this scheme. The investment can be made in a lump sum manner, or one can go for a SIP route as well. This fund has given tremendous returns over the years. The average returns of the past 5 years have been around 14 percent.

Fund Name Category Minimum lump sum amount Fund Manager 
ABSL Tax Relief 96 Fund ELSS Rs. 500/- Ajay Garg

 

Best Equity Large and Mid Cap Mutual Funds

The Equity Large and Midcap mutual funds invest in a mix of large and mid-cap companies listed on the stock exchange. These funds have investments in India’s top 200 companies in terms of market capitalisation. Investors who are aggressive and have a higher risk tolerance can invest in such funds. The best mid-cap funds to invest in 2021 are:

  • Axis Mid Cap Fund

Investors looking to invest in mid-cap companies can invest in this fund. This fund is open-ended and is rated in the Moderately High-Risk category. It is one of the leading midcap funds based on returns generated. Investors can start a SIP or make a lump sum investment as low as Rs. 500 in this fund. Mr Shreyas Devalkar manages the fund.

Fund Name Category Minimum lump sum amount Fund Manager 
Axis Mid Cap Fund Large & Mid Cap Rs. 500/- Shreyas Devalkar

 

  • Motilal Oswal Large and Mid Cap Fund

This fund seeks to provide medium to long term capital appreciation by investing in large-cap and mid-cap stocks of companies listed on the stock exchange. The scheme was launched in October 2019 and has given around 26 percent returns since then.

Fund Name Category Minimum lump sum amount Fund Manager 
Motilal Oswal Large & Mid Cap Fund Large & Mid Cap Rs. 500/- Aditya Khemani

Abhiroop Mukherjee

 

  • ICICI Prudential Large and Mid Cap Fund

ICICI AMC launched this scheme in 2013. This fund invests in large and mid-cap companies. The fund has given decent returns in the past. The average returns of the last 3 years are around 11 percent. Sankaren Naren, Priyanka Khandelwal and Prakash Goel are the fund managers of this scheme.

Fund Name Category Minimum lump sum amount Fund Manager 
ICICI Pru Large & Mid Cap Fund Large & Mid Cap Rs. 5000/- Sankaren Naren

Priyanka Khandelwal

 

Best Hybrid (Moderate Risk) Mutual Funds

Hybrid Mutual funds are a category of funds that invest in more than one asset class. In most cases, they are a combination of debt and equity. Some funds may include gold or real estate. Investors seeking exposure in multi assets can invest in such funds. When it comes to moderate hybrid mutual funds, the equity portion is higher than conservative hybrid funds. Moderate hybrid funds have to allocate 40 to 60 percent of their corpus to equity or equity-related instruments and at least 20 percent in debt. These funds are known to generate higher returns at relatively high risks than the conservative hybrid funds. The best moderate risk hybrid mutual funds to invest in are as follows:

  • Mirae Asset Hybrid Equity Fund

Mirae Asset Hybrid Equity Fund has an AUM of around 4300 crores and was launched in July 2015.  It has been a consistent performer for the past 3 years. A lump sum investment of minimum Rs. 5000 can be done by the investors, and a minimum SIP amount is Rs. 1000. Mr. Sudhir, Vrijesh, Harshad and Neelesh are the fund managers of this scheme.

Fund Name Category Minimum lump sum amount Fund Manager 
Mirae Asset Hybrid Fund Hybrid

(Moderate)

Rs. 5000/- Neelesh Surana

Sudhir Kedia

  • ICICI Prudential Equity & Debt Fund

It is a hybrid scheme launched by ICICI AMC on 3rd November 1999. This scheme has given consistent returns of approximately 15 percent in the last 5 years. The AUM of this fund has grown to around 16000 crores. Investors looking to invest in moderately high-risk hybrid funds can invest in this fund for stable returns.

Fund Name Category Minimum lump sum amount Fund Manager 
ICICI Pru Equity & Debt Fund Hybrid

(Moderate)

Rs. 5000/- Sankaren Naren

Atul Patel

Nikhil Kabra

  • Axis Equity Hybrid Fund

This is a hybrid scheme that invests in a mix of equity and equity-related instruments, debt instruments and money market instruments. The fund was launched in 2018 and is managed by Mr Ashish Naik. New age investors who want to take exposure in debt and equity can invest in this fund for the long term.

Fund Name Category Minimum lump sum amount Fund Manager 
Axis Equity Hybrid Fund Hybrid

(Moderate)

Rs. 5000/-

 

Best Hybrid (Conservative Risk) Mutual Funds

Conservative Hybrid Mutual Funds are a part of the Hybrid Mutual fund category that invests in low-risk instruments such as bonds, debentures, money market instruments, and some portion in equity and equity-related instruments. They aim to outperform the average inflation rate. They do not employ their corpus to excessive risky instruments. They are known to provide regular and steady income and may provide long-term capital appreciation for little equity exposure. Here are some of the best conservative hybrid mutual funds to invest in 2021:

  • Aditya Birla Sun Life Balanced Advantage Fund

Balanced Advantage funds have gained immense popularity in recent years. A notable feature of balanced advantage funds is that they work on a dynamic asset allocation strategy. This strategy allocates higher amounts to debt when equity is overvalued and allocates higher amounts to equity when equity valuations are attractive. These hybrid funds invest in pure equity instruments, arbitrage opportunities, derivative strategies, debt and money market instruments. 

Investment through a SIP or in a lump sum manner in these funds gives investors peace of mind without worrying about the market’s volatility. Aditya Birla’s fund has been providing good returns of around 10 percent from the past 3 years.  

Fund Name Category Minimum Lump sum amount Fund Manager 
Aditya Birla Sun Life Balanced Advantage Fund Hybrid (Conservative) Rs. 100/- Vineet Maloo

Mohit Sharma

 

  • Edelweiss Balanced Advantage Fund

Edelweiss Balanced Advantage fund was launched in January 2013 and has a total AUM of around 2200 crores rupees. This scheme also works on the Dynamic Asset Allocation strategy and has given superb returns in the past few years. Investors looking to create wealth long term without taking too much risk can invest in this scheme. The fund has managed to beat the category average returns in the last five years.

Fund Name Category Minimum lump sum amount Fund Manager 
Edelweiss Balanced Advantage Fund Hybrid (Conservative) Rs. 5000/- Bhavesh Jain

Gautam Kaul

 

  • Motilal Oswal Dynamic Fund

This is a conservative hybrid fund from Motilal Oswal AMC that invests in both equity and debt. The fund was launched in September 2016 and has given good returns in the last 3 years. Mr Akash and Gautam are the fund managers managing this scheme.

Fund Name Category Minimum lump sum amount Fund Manager 
Motilal Oswal Dynamic Fund Hybrid (Conservative) Rs. 500/- Akash Singhania

Snigdha Sharma

 

These were some of the best equity funds across various categories that you can consider investing in 2021. But, you should keep in mind that investments in equities are subject to risks and you should make sure you have the right risk appetite before venturing into equity mutual funds. Also, equity mutual funds offer good returns when you remain invested over longer time frames.

You can invest in any of these funds on the Finity App, which could be downloaded from the links at the bottom of the page.


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Top Nifty Index funds to invest in 2021

Home » Mutual Funds » Best Mutual Funds

Top Nifty Index funds to invest in 2021

Nifty Index Funds are index funds that primarily invest in stocks that form part of the Nifty index. These are passively managed funds. The investment in stocks is also made in the same proportion as in the index. These funds do not aim to beat the indices like Nifty 50 or Sensex but to mirror the index performance. 

Index funds are increasingly preferred by many investors because of the low management fees, as these do not require fund managers to design strategies on stock selection.

Here, we will learn some basics of index funds and also some top-performing Nifty index funds to invest in.

What are Index Funds?

An index fund is a type of mutual fund in which the portfolio is constructed to match the components of a market index, such as the Nifty 50. An index fund provides broader market exposure, has low operating expenses, and also minimal portfolio turnover. 

Index funds adopt a passive investment strategy as they seek to match the risk and return profile of the market. The theory that index funds follow in the long-term is that the market will outperform any individual stock investment.

What are the benefits of investing in Nifty Index Funds?

Here are some benefits offered by Nifty Index fund investments:

  1. Index funds follow passive investment strategy and therefore replicate the index constituents. This way, the portfolio mix is simple and also easier to monitor as compared to individual stock investments.
  2. These involve far lesser cost as compared to other mutual funds since there is no need for active management around stock-selection strategies.
  3. Nifty index funds have historically generated healthy returns in the long term. The NSE Nifty index base year is 1995 and has seen 11-fold returns in the past 23 years. This means an index fund following Nifty would have made similar returns in those years. 
  4. The Nifty is well tracked and offers a macro view that is based on historical data. This is much easier to follow as compared to specific stock performance. 
  5. Index funds may also overcome the selection bias, since the portfolio composition is not at the discretion of fund managers. Since index funds are passive funds, these just track the index. 

 

Top Nifty Index Funds to invest in 2021

Mentioned below are some top Nifty index funds in India:

L&T Nifty 50 Index Fund – Growth – Direct Plan

About the fund

L&T Nifty 50 Index Fund belongs to L&T Mutual Fund umbrella. This scheme was launched on 15-Apr-2020. It adopts a passive investment strategy and invests in stocks that comprise the Nifty 50 index. 

Inception Date April 15, 2020
Benchmark Name Nifty 50
Fund Manager Praveen Ayathan
Objective The primary objective is to achieve returns in tandem to the Total Returns Index of Nifty 50 index. The scheme aims to minimise performance difference between its returns and the benchmark index.

 

Sector Allocation

Here is a table of the fund’s top percentage allocation of investment across sectors:

Sectors Percentage Allocation
Financial  38.8%
Technology 16.4%
Energy 14.6%
Consumer Goods 8.4%
Others 16.5%

UTI Nifty Index Fund – Growth

About the fund

This fund is ideal for those investors who are looking for capital growth in line with the index returns. The fund follows a passive investment strategy through investment in equity instruments that are part of the Nifty 50 Index. It aims to replicate the underlying index of Nifty 50 to minimize the return differential between the fund and index.

Inception Date March 06, 2000
Benchmark Name Nifty 50
Fund Manager Sharwan Kumar Goyal
Objective The main investment objective of the fund is to invest in stocks comprising the Nifty 50 Index and aim to achieve returns that are equivalent to the Nifty 50 Index through “passive” investment.

 

Sector Allocation

Here is a table of the fund’s top percentage allocation of investment across sectors:

Sectors Percentage Allocation
Financial  40.2%
Technology 16.01%
Oil & Gas 13.03%
Consumer Goods 10.19%
Automobile 5.73%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
45.28% 17.86 14.87% 15.97 11.24%

 

ICICI Prudential Nifty Index Fund – Growth

About Fund

ICICI Prudential Nifty Index Fund – Growth is a passively managed mutual fund that was launched in January 2013. This is rated as a high-risk investment that requires a minimum SIP investment of Rs. 1000 and lump-sum investment of Rs.100. This fund has a large exposure to the banking, software, and petroleum industries. The investments are highly concentrated in large-cap stocks that form part of the Nifty 50. 

Inception Date January 01, 2013
Benchmark Name Nifty 50
Fund Manager Mr Kayzad Eghlim
Objective The objective of the fund is to closely monitor the performance of Nifty 50 and invest in stocks that are part of the index. It does not aim to outperform or underperform the index. 

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Finance 38.1%
Technology 17.1%
Energy 14%
FMCG 8.2%
Automobile 5.9%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
56.95% 15.87% 13.46% 15.30% 11.19%

HDFC Index Fund-NIFTY 50 Plan

About the fund

This is an open-ended scheme that replicates NIFTY 50 Index. The Scheme is passively managed with investments in stocks in a similar proportion and weights as in the NIFTY 50 Index. The investment strategy focuses on reducing the tracking error through regular portfolio rebalancing.

Inception Date January 1, 2013
Benchmark Name Nifty 50
Fund Manager Arun Agarwal
Objective The investment objective of the Scheme is to generate returns in line with the NIFTY 50 Index performance. The scheme, however, does not assure that the performance will be met at all times.

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Financial Services 39.58%
Technology 15.77%
Energy 15.06%
FMCG 7.46%

 

Historical Returns of the Fund (annualised)

1-Year 3-Year 5-Year Since Inception
45.75% 14.38% 16.16% 13.12%

SBI Nifty Index Fund

About the fund

This scheme invests in stocks comprising the Nifty 50 index as per the weightage in the index. The primary aim of the scheme is to achieve returns similar to the Total Returns Index of the Nifty 50 index. It also aims to minimize the performance difference between the benchmark index and the scheme. 

Inception Date January 17, 2002
Benchmark Name Nifty 50
Fund Manager Raviprakash Sharma
Objective The objective of the fund is to generate returns that are similar to the performance of the Nifty 50 index by investing in a stock composition that is similar to the index.

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Financial Services 38.55%
IT 15.36%
Oil & Gas 12.5%
Consumer Goods 9.77%
Automobile 5.48%
Pharma 3.13%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
44.14% 17.01% 14.15% 15.30% 10.66%

How to Invest in Nifty Index Funds?

Investors can easily invest in the best Nifty index funds through the Finity app. Here are the steps to be followed:

  1. Download and launch Finity app on your smartphone. 
  2. Choose Équity on the home screen and click on ‘Index’ option in the next step
  3. Tap on ‘invest’ against the selected fund option from the list
  4. Choose either ‘SIP’ or ‘Lump-sum’ investment and enter the amount of investment
  5. Provide your basic details as directed by the app
  6. Complete the payment procedure to start your investment

End Note

Index funds are a good investment choice for investors who are mostly risk-averse and want predictable returns from their investment portfolio. The biggest advantage of index funds is that they do not require extensive tracking. Before investment, investors must study the historical returns of the fund, check the tracking error and make an informed investment decision.


Frequently Asked Questions

Which Nifty Index Fund is best?
Some of the top-performing Nifty index funds are:
UTI Nifty Index Fund
HDFC Index Fund Nifty 50 Plan
LIC MF Index Fund
ICICI Prudential Nifty Index Fund

Is the Nifty index fund a good investment?
Nifty index funds are best-suited to risk-averse investors who wish to generate better returns from their investment portfolio and want to remain invested for a longer duration. As the Nifty index is made up of 50 stocks, the risk is better diversified here.

How to choose the best index fund?
Investors must first evaluate the index which they want their fund to follow. Accordingly, they must look through the available index fund options in the chosen index. It is also important to check the historical returns, and other factors like expense ratio and tracking errors before making an investment decision.

Do index funds charge fees?
Index funds generally have an expense ratio of 0.5% or less. This is far lower when compared to other mutual funds and therefore, index funds charge lesser fees when compared to other funds.

Can I sell index funds any time I want?
You can sell an index fund investment any time you like. Index funds are like mutual funds, you can always buy it from and sell it to the Mutual fund company. Unlike an ETF you don’t have to look for buyers in the market.


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Top Sensex index funds to invest in 2021

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Home » Mutual Funds » Best Mutual Funds

Top Sensex index funds to invest in 2021

An index fund is a type of mutual fund in which the portfolio is constructed by identifying and replicating the composition of a market index like Sensex, Nifty 50, etc. The index fund then invests in the stocks that make up the benchmark index and in the same proportion as in the index.

Index funds are the latest entrants in the market of risk-averse investors. These are transparent investment options that offer diversity at a lower cost and steady returns in the long run. Investors can own top stocks through an index fund as it replicates a market index and reflects the overall economic growth in the country. 

Read on to learn more about index funds and some top Sensex index funds in 2021.

What are index funds?

An index fund tries to replicate the performance of a market index by following its composition of stocks. These are also known as passive funds since they do not have active management by a manager. Thus, the expense ratio of index funds is far lower than the actively managed funds, and this makes them cost-efficient.

Index funds are new to the Indian investment market, however, more investors are getting attracted to this form of investment considering the diversification and low-cost features.

Why invest in Sensex index funds?

The Sensex is an Indian market index that was earlier known as the Bombay Stock Exchange (BSE). Sensex is made up of the 30 largest and most actively traded stocks on BSE and hence is considered as a benchmark for the stock market. One of the oldest stock indexes, Sensex, is mainly used by investors to observe the growth and development of specific industries and fluctuations of the Indian economy.

Index funds that follow the Sensex as benchmark index are known as Sensex index funds. Investors prefer to invest in Sensex index funds since they can easily get exposure to the stocks of top companies in the country without having to buy stocks of individual companies.

Top Sensex index funds to invest in 2021

Mentioned below are some top Sensex index funds in India:

HDFC Index Fund – Direct-Growth – Sensex Plan

About the fund

HDFC Index fund – Sensex plan is an open-ended scheme that replicates S&P BSE SENSEX Index. The Scheme is passively managed with stock investments in a proportion that is similar to their weights in the S&P BSE SENSEX Index. 

Inception Date January 01, 2013
Benchmark Name S&P BSE SENSEX
Fund Manager Mr. Arun Agarwal

Mr. Krishan Kumar Daga

Objective To fetch returns that are equivalent to the performance of the S&P BSE SENSEX Index, subject to tracking errors.

 

Sector Allocation

Here is a table of the fund’s top percentage allocation of investment across sectors:

Sectors Percentage Allocation
Financial  41.4%
Technology 18.54%
Energy 14.18%
FMCG 8.69%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
56.06% 17.20% 15.32% 16.59% 13.47%

ICICI Prudential Sensex Index Fund – Direct Growth

About Fund

ICICI Prudential Sensex Index Fund – Growth is an open-ended fund that tracks and emulates the performance of the S&P BSE Sensex index. This is done through investment in the same stocks that are part of the Sensex index. 

Inception Date September 21, 2017
Benchmark Name S&P BSE SENSEX
Fund Manager Mr Kayzad Eghlim
Objective The fund objective is to track and replicate the performance of the S&P BSE Sensex index. This is done primarily by investing in the same stocks which constitute the Sensex index.

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Financial Services 41.15%
Technology 18.44%
Energy 14.11%
FMCG 8.61%

 

Historical Returns of the fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
57.53% 16.32% 13.92% 15.75% 12.99%

Tata Index Fund – SENSEX – Direct Plan

About the fund

This is an open-ended equity scheme tracking S&P BSE Sensex. Tata Index Fund is a passively managed fund that aims to provide returns that closely correspond to the returns of the Sensex. This fund option is rated as very high risk and it requires a minimum SIP investment of Rs. 500. Investors have to make a minimum lump-sum investment of Rs. 5,000.

Inception Date January 1, 2013
Benchmark Name S&P BSE SENSEX TRI
Fund Manager Sonam Udasi
Objective To offer long term capital appreciation by mirroring the S&P BSE Sensex returns by investing in stocks which comprises of S&P BSE Sensex. 

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Financial Services 41.61%
Technology 18.82%
Energy 14.1%
FMCG 8.64%

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
55.40% 17.29% 15.48% 16.51% 12.97%

LIC MF Index Fund – Sensex Plan – Direct Plan

About the fund

LIC Sensex Index Fund invests 98.93% of its funds in Indian stocks. Out of this, 87.79% is concentrated in large-cap stocks. It is ideal for investors who are looking for long-term capital growth. Investment is concentrated in equity instruments of S&P BSE Sensex Index stocks and is subject to tracking error.

Inception Date January 01, 2013
Benchmark Name S&P BSE Sensex TRI
Fund Manager Yogesh Patil

Ritu Modi

Objective The objective of the fund is to generate returns that are similar to the performance of the index S&P BSE Sensex. It aims to achieve this by investing in the respective index stocks.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Financial 41.5%
Technology 18.6%
Energy 14.2%
FMCG 8.7%
Others 16.9%

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
55.56% 17.04% 15.02% 15.93% 12.63%

How to invest in Sensex Index Funds ?

Investors can now invest in the top Sensex index funds easily by using the Finity app. Here are the steps to be followed:

  1. Download  (Links at the bottom of this page) and launch Finity app on your smartphone
  2. Choose Équity on the home screen and click on ‘Index’ option in the next step
  3. Tap on ‘Invest’ against the selected fund option from the list
  4. Choose either ‘SIP’ or ‘Lump-sum’ investment and enter the amount of investment
  5. Provide your basic details as directed by the app
  6. Complete the payment procedure to start your investment

End Note

Investors prefer index funds because of lower expenses and other fees as compared to actively managed funds. Through passive management, index funds aim to match the risk and return of the market index. These are designed on the theory that in the long-term, the market outperforms individual or single investments.


Frequently Asked Questions

Which index fund is better: Nifty or Sensex?
The Sensex comprises 30 of the largest stocks while the NSE is made up of 50 equity stocks. While both are similar in the movements faced due to economic fluctuations, Nifty covers a wide range of sectors as compared to Sensex.

Can index fund investment make me rich?
There is no guarantee that index fund investments will make you rich. The returns generated from index funds depend on many factors such as the market index it tracks, economic situation, underlying stock performance, etc.

Is Index fund investment better than ETF?
ETFs involve lesser cost as compared to Index funds since the latter charge transaction fees along with a comparatively higher expense ratio. Investors can choose between the two as per their investment preferences and strategies.

Is it a good time to buy index funds?
Index fund investment timing depends on personal financial goals and investment strategy. There is no such thing as the perfect time to invest in index funds, however, some investors may prefer to observe market movements before making an investment.


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Top Performing Large Cap Fund Investments for 2021

Home » Mutual Funds » Best Mutual Funds

Top Performing Large Cap Fund Investments for 2021

Stock markets see many new investors every day and most of them often have questions like, which stocks are the best, where should I invest my money, which stock will give more returns, etc. These questions are best addressed before diving into the stock market world, else it could result in losses. Every stock market investor must aim to gather sufficient knowledge of investment categories, types, strategies, etc before making an investment. 

Stocks are mostly categorised as per their market capitalisation, also known as market cap. Market cap is a reflection of the company’s size. The three main stock classifications according to market cap are large-cap, mid-cap, and small-cap. A company’s size is a crucial factor to be considered while choosing stocks for investment. A large-sized company brings some unique opportunities as they are well established companies and therefore, many investors prefer large-cap fund investments. If you are keen on exploring large cap fund investments, here is all the information you will need to begin with.

What are Large Cap Funds?

Large cap funds are mutual funds that primarily invest in stocks of companies that have large market capitalization. Large cap companies are those which are well-established in the business segment and have a long positive track record. These companies have good corporate-governance and wealth-generation is often a slow and steady process. ​ 

Why invest in Large cap funds?

Since large-sized companies have a steady performance, investors can expect regular dividend payouts. As far as the risk-return is concerned, large-cap funds have mostly steady returns with a lower risk factor as compared to mid-cap and small-cap funds. Here are some features which make large cap funds an ideal investment choice:

  • Large cap funds normally see significant capital growth apart from offering stability to investors. 
  • The investment value of large-cap funds is usually unaffected by frequent market volatility. These offer some level of security to investors as the NAV of such funds is mostly stable.
  • Investors who are looking for diversification with moderate to low risk can opt for large-cap funds.
  • Investors can expect returns in the long term. These are not ideal for investors who are looking for immediate profits.

Recommended Large Cap Funds

To help investors in their search for the best investment options within large-cap funds, mentioned below are some details on Top-5 large-cap mutual funds in India.

ICICI Prudential Bluechip

About  the fund

ICICI Prudential Blue chip Fund is an open-ended large-cap equity fund that offers growth and stability to investor’s portfolios. It focuses on investments in blue-chip stocks which are diversified across various sectors.

Inception Date November 24, 2009
Benchmark Name Nifty 50
Fund Manager Jitendra Arora
Objective To provide long-term capital appreciation through an equity portfolio that is mainly invested in large-cap stocks.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Financial and insurance activities 22.28%
Computer programming, consultancy and related activities 14.37%
Manufacture of coke and refined petroleum products 8.94%
Infrastructure 8.51%
Manufacture of chemicals and chemical products 7.24%
Manufacture of motor vehicles, trailers and semi-trailers 4.48%
Manufacture of pharmaceuticals,medicinal chemical and botanical products 4.30%
Manufacture of tobacco products 2.91%
Manufacture of Basic Metals 2.70%
Manufacture of other non-metallic mineral products 2.19%
Others 22.10%

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
26.59% 20.08% 11.68% 16.74% 13.43%

Axis Bluechip Fund

About Fund

Axis Blue chip Fund is an open-ended large-cap equity scheme designed for investors who aim for capital appreciation in the long run. It offers portfolio diversification with a combination of equity and equity-related instruments, predominantly focused on large-cap firms.

Inception Date January 1, 2013
Benchmark Name Nifty 50 Total Return
Fund Manager Shreyash Devalkar
Objective Long-term capital appreciation through portfolio diversification comprising equity and related securities of large-cap firms.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Financial Services 40.21%
IT 16.68%
Consumer Goods 15.79%
Pharma 7.11%
Oil & Gas 5.7%

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
20.51% 22.59% 17.33% 18.49% 14.37%

UTI Master Share

About  the fund

UTI Master Share fund invests in large market capitalisation companies and follows Growth at Reasonable Price (GARP) investment style. This well-diversified portfolio avoids sector and stock concentration. It has had a positive track record in dividend distribution since its inception.

Inception Date October 15, 1986
Benchmark Name S&P BSE 100
Fund Manager Swati Kulkarni
Objective To achieve long term capital appreciation through investments predominantly in equity and equity related securities of large cap companies.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Financial Services 32.01%
IT 16.21%
Consumer Goods 12.63%
Pharma 9.4%
Automobile 6.85%
Oil & Gas 5.47%
Telecom 5.05%

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
19.39% 16.75% 9.85% 13.46% 10.78%

Mirae Asset Large Cap

About the fund

This is an open-ended equity fund that predominantly invests across large-cap stocks. It follows a sector and theme agnostic stock selection strategy. It focuses on investment across sector leaders who have a strong competitive advantage. It is suited to investors looking for an investment horizon of at least 3-4 years. 

Inception Date April 4th, 2008
Benchmark Name Nifty 100 (TRI)
Fund Manager Gaurav Misra

Harshad Borawake

Objective To achieve long-term capital appreciation through investments predominantly in equity and equity-related securities of large-cap companies.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Banks 25.68%
Software 14.47%
Petroleum Products 11.48%
Consumer Non Durables 9.84%
Finance 7.53%
Pharma 7.51%
Auto 5.48%
Telecom 3.82%
Consumer Durables 3.74%
Construction 2.35%
Others 6.7%

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
25.89% 20.28% 12.93% 18.81% 15.66%

Canara Robeco Blue Chip Equity Fund 
About  the fund

This is an open-ended equity fund that predominantly invests across large-cap stocks. It follows a sector and theme agnostic stock selection strategy. It focuses on investment across sector leaders who have a strong competitive advantage. It is suited to investors looking for an investment horizon of at least 3-4 years. 

Inception Date April 4th, 2008
Benchmark Name Nifty 100 (TRI)
Fund Manager Shridatta Bhandwaldar

Sanjay Bembalkar

Objective To generate capital appreciation by predominantly investing in large cap companies. 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sector Percentage Allocation
Banks 23.67%
Software 15.63%
Finance 10.5%
Consumer Non Durables 8.35%
Auto 6.05%
Pharma 5.92%
Petroleum 5.53%
Construction 4.92%
Consumer Durables 3.75%

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
28.43% 26.11% 17.20% 18.94% 13.84%

Ways to Invest in Large Cap Funds 

Now, you can easily invest in some of the best large cap funds by using the Finity app. Here are the steps you need to follow:

  1. Download and launch Finity app on your smartphone
  2. Click on Équity on the home screen and select ‘large-cap’ option in the next step
  3. Click on ‘ínvest’ against the chosen fund option from the available list
  4. Select either ‘SIP’ or ‘Lumpsum’ investment and enter the amount
  5. Enter your basic details as shown on app
  6. Follow the payment procedure to begin your investment

Things to Consider Before investing in Large Cap Funds

Large Cap Funds offer steady returns with comparatively lower risk. To gain good returns, investors should consider a five to seven-year horizon while investing in large cap funds. Here are some of the important things to consider before investing in these funds:

  • Large Cap funds are not risk-proof: Large Cap equity funds do have several risks that are mainly market-related. However, these risks are significantly moderate as compared to small-cap or mid-cap funds.
  • Consider the expense ratio: Large Cap funds do have expenses related to fund management. This affects the expense ratio of the fund. Hence, while choosing a fund, look for a lower expense ratio which can help in fetching higher profits.
  • Work better for a longer investment horizon: Large Cap equity funds can fetch good returns in the medium to long run. It makes sense to remain invested for least three to five years in large cap funds so as to get reasonable returns.
  • Are subject to Capital Gains Tax: Large Cap funds are subject to the same tax treatment as any other equity asset. Long term capital gains (LTCG) is applicable for an investment period of more than one year. 

End Note

Large cap funds are ideal for investors who have lower risk tolerance. However, it is important to remember that these too are subject to market risks and investors must carefully assess their investment objectives against the fund objectives before making a decision.


Frequently Asked Questions

What is a large-cap fund?
Large cap funds are equity focussed funds that primarily invest in well-established and top companies which have an excellent performance track record.

Are large cap funds safe investments?

Large cap funds offer relatively higher safety sin
ce they are focused on stocks of large and well-established companies which can withstand market fluctuations in the long run.

What is the meaning of blue-chip funds?
Blue-chip is a term used for financially strong and well-established companies. A fund that invests primarily in blue-chip stocks is known as a blue-chip fund.

How can I invest in a large cap fund?
You can invest in a large cap fund by using the Finity app. The app shows a list of top-performing large cap fund options, which makes the selection process easier.

Why should I invest in a large cap fund?
You can invest in a large cap fund if your investment time horizon is long term. Also, it makes sense to choose this if you have a relatively lower risk appetite.

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Best Small cap funds to invest in 2021

Home » Mutual Funds » Best Mutual Funds

Best Small Cap Funds to invest in 2021

Small-cap funds, as the name suggests, are equity funds that invest a minimum of 65% of their funds in equity/stocks of small-cap companies. Many large-cap companies that we know today, like Britannia, Titan, etc were once small-cap companies that established themselves as market leaders over many years. Investors often see the potential of small-cap companies and invest in them now to reap the benefits of growth in the future.

Here is some useful information on small-cap fund investments and some top performing funds in this segment.

What are Small Cap Funds?

To understand small cap funds, it is important to know the meaning of market cap or market capitalisation. Market capitalization measures a publicly-traded company’s worth by taking the share price of the company and multiplying this by the total number of shares outstanding. Every company has a different size and depending on its size, it could either be a large-cap, mid-cap, or small-cap company.

Small-cap funds are equity mutual funds that invest primarily in small-cap companies. Small-cap companies are those which rank beyond 250 with regards to full market capitalisation. Small-caps are known to have high return potential but have many risks that come along. Small-cap companies have small-scale operations and also restricted access to resources. Thus, they often face survival risk when there is an economic downswing. 

Reasons to Invest in Small-cap funds

Here are some benefits offered by small-cap funds:

  • Small-cap funds have a wider range of options for investment as compared to large cap, mid-cap or sector funds.
  • Small cap companies have higher growth prospects because of new/emerging business segments that grow at a faster pace.
  • Because of the availability of new technologies and products/services, these also have far greater potential to quickly gain market share.
  • Small cap companies are influenced by company-specific factors more than by macro-economic factors.
  • As compared to large and mid-cap stocks, small-cap stocks can recover faster during economic recoveries.

Who Can Invest in Small Cap Funds?

Small cap funds can be an ideal investment choice for the following investor categories:

  • Investors who are looking to benefit from the higher growth potential of small cap companies.
  • Long-term investors who have a higher risk appetite and sufficient prior exposure to market volatility.
  • Investors who can remain invested for a horizon of at least 5 years.

Research recommended Small-Cap Funds

Based on historical performance, here are the top investment options within small-cap funds.

  1. SBI Small Cap Fund Regular Plan-Growth
  2. Kotak Small Cap Growth
  3. Axis Small Cap Fund Regular Growth
  4. ICICI Prudential Small-Cap Fund

SBI Small Cap Fund Regular Plan-Growth

About fund

SBI Small Cap Fund aims to offer opportunities to investors for long-term growth through investments in a well-diversified basket of equity securities, primarily of small cap companies. It follows a combination of growth and value format of investing and has a bottom-up investment approach for stock selection.

Inception Date September 09, 2009 
Benchmark Name S&P BSE Small Cap Index
Fund Manager R. Srinivasan
Suitable For Investors who want to remain invested for a minimum of 3-4 years and expect very high returns while having a high risk appetite.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Consumer Goods 27.88%
Industrial Manufacturing 19.09%
Services 9.13%
Chemicals 7.94%
Cement 7.58%
Construction 6.63%
Financial Services 6.14%
Automobile 3.27%
Cash and cash equivalents 3.36%
Healthcare services 3.18%
Power 1.69%
Textiles 1.42%
Pharma 1.42%
Metals 0.88%
Paper 0.39%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
35.57% 27.16% 9.53% 21.43% 21.68%

Kotak Small Cap Growth

About Fund

The principal objective of Kotak Small cap fund is to generate capital appreciation through investment in various equity & equity related securities of small cap companies. The scheme is designed to offer potential growth benefits offered by small cap securities.

Inception Date February 24, 2005
Benchmark Name NIFTY Smallcap 50 TRI
Fund Manager Pankaj Tibrewal
Suitable For Investors who wish to stay invested for a minimum of 3-4 years and expect very high returns. Also, investors who can bear higher losses.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Consumer Goods 23.61%
Industrial Manufacturing 15.82%
Chemicals 8.09%
Construction 7.41%
Services 7.10%
Financial Services 5.92%
Information Technology 5.70%
Metals 5.63%
Cement & Cement Products 4.67%
Automobile 4.34%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
47.03% 33.37% 13.84% 20.54% 17.80%

 

Axis Small Cap Fund Regular Growth

About Fund

This is an open-ended equity scheme that primarily invests in small-cap stocks. The primary aim of this scheme is to generate long-term capital appreciation through equity investments in small cap companies. It follows the bottom-up approach of investment. 

Inception Date November 11, 2013
Benchmark Name Nifty Free Float Smallcap 100 TRI
Fund Manager Anupam Tiwari
Suitable For Investors who want to remain invested for a minimum of 3-4 years and expect very high returns while having a high risk appetite.

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Construction 21.93%
Chemicals 14.75%
Financial 14.28%
Technology 11.08%
FMCG 10.58%
Healthcare 5.96%
Metals 4.05%
Services 4.02%
Consumer Durables 2.67%
Engineering 2.53%
Diversified 2.14%
Textiles 0.57%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
21.53% 27.43% 14.92% 19.07% 21.99%

ICICI Prudential Small-Cap Fund

About Fund

This is an open-ended scheme which primarily invests in small-cap stocks. It is suitable for conservative investors who have medium-term goals. The aim of the scheme is to generate capital appreciation through investments in equity and equity-related securities of small-cap stocks.

Inception Date October 18, 2007
Benchmark Name Nifty Smallcap 250 Index

Nifty 50 Index TRI

Fund Manager Sanaran Naren

Harish Bihani

Suitable For Conversative investors who want higher returns and have medium term goals. 

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Finance 15.68%
Construction 10.78%
Software 7.77%
Consumer Non Durables 7.69%
Industrial Products 7.48%
Consumer Durables 7.23%
Cement 5.43%
Chemicals 4.66%
Pharma 4.02%
Media & Entertainment 3.91%
Transportation 3.89%
Healthcare Services 3.86%
Retailing 2.79%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
33.16% 28.68% 7.51% 16.08% 13.51%

Ways to Invest in Small-Cap Funds 

If you are looking to invest in small-cap funds, you can do so by using the Finity app. Here are some easy steps to follow:

  1. Download and launch Finity app on your smartphone
  2. Click on Équity on the home screen and select ‘small-cap’ option
  3. Click on ‘invest’ against a fund of your choice from the available list
  4. You can either opt for ‘SIP’ or ‘Lumpsum’ investment depending on your preference
  5. Enter the amount to invest
  6. Next, enter your basic details as seen on your phone screen
  7. Complete the payment process to start your investment

 

Things to Consider Before investing in Small Cap Funds

Every investment form has different return and risk profiles. Investing in small-cap funds makes sense for investors who have long-term financial goals. For new investors, here are some factors to consider before making an investment in small-cap funds:

Fund Returns

Every investor would want higher returns from their investment. According to past trends, many small-cap funds may tend to outperform large-cap funds. However, an investor has to carefully select a fund basis his/her financial goals and after studying the historical performance of the specific fund. No fund can guarantee high returns and therefore, investors have to be prepared to face lower returns from small-cap funds too.

Risk 

Small-cap funds can pose a significant amount of risk since they are heavily impacted by market volatility. There is always a high-risk-return tradeoff when it comes to small-cap funds. Therefore, only investors with a high-risk appetite and long-term goals must go for small cap funds. 

Growth potential of stocks 

Small cap funds are ideal to add growth to an investor’s portfolio. These can have tremendous growth potential as compared to large caps which are generally at the peak of the growth curve. Investors must pick funds which invest in stocks of fast-growing companies and have stronger potential to be future market leaders.

Diversification benefits

Mutual funds offer the benefit of diversification to investors, especially those investing in small-cap stocks. This way, investors can balance the risk-return tradeoff and enjoy the benefits of diversification. Investors must try and spread their investment across small cap, mid-cap, and large-cap stocks instead of purely focusing on small-cap funds which are generally high risk.

EndNote

Small cap funds are ideal for investors with a higher risk appetite and long-term financial goals. All Small-cap funds highlight the market risk involved, therefore, investors must carefully analyse their investment objectives against the mutual funds’ before choosing a small-cap fund.

Small-cap funds, as the name suggests, are equity funds that invest a minimum of 65% of their funds in equity/stocks of small-cap companies. Many large-cap companies that we know today, like Britannia, Titan, etc were once small-cap companies that established themselves as market leaders over many years. Investors often see the potential of small-cap companies and invest in them now to reap the benefits of growth in the future.

Here is some useful information on small-cap fund investments and some top performing funds in this segment.

What are Small Cap Funds?

To understand small cap funds, it is important to know the meaning of market cap or market capitalisation. Market capitalization measures a publicly-traded company’s worth by taking the share price of the company and multiplying this by the total number of shares outstanding. Every company has a different size and depending on its size, it could either be a large-cap, mid-cap, or small-cap company.

Small-cap funds are equity mutual funds that invest primarily in small-cap companies. Small-cap companies are those which rank beyond 250 with regards to full market capitalisation. Small-caps are known to have high return potential but have many risks that come along. Small-cap companies have small-scale operations and also restricted access to resources. Thus, they often face survival risk when there is an economic downswing. 

Reasons to Invest in Small-cap funds

Here are some benefits offered by small-cap funds:

  • Small-cap funds have a wider range of options for investment as compared to large cap, mid-cap or sector funds.
  • Small cap companies have higher growth prospects because of new/emerging business segments that grow at a faster pace.
  • Because of the availability of new technologies and products/services, these also have far greater potential to quickly gain market share.
  • Small cap companies are influenced by company-specific factors more than by macro-economic factors.
  • As compared to large and mid-cap stocks, small-cap stocks can recover faster during economic recoveries.

Who Can Invest in Small Cap Funds?

Small cap funds can be an ideal investment choice for the following investor categories:

  • Investors who are looking to benefit from the higher growth potential of small cap companies.
  • Long-term investors who have a higher risk appetite and sufficient prior exposure to market volatility.
  • Investors who can remain invested for a horizon of at least 5 years.

Research recommended Small-Cap Funds

Based on historical performance, here are the top investment options within small-cap funds.

  1. SBI Small Cap Fund Regular Plan-Growth
  2. Kotak Small Cap Growth
  3. Axis Small Cap Fund Regular Growth
  4. ICICI Prudential Small-Cap Fund

SBI Small Cap Fund Regular Plan-Growth

About fund

SBI Small Cap Fund aims to offer opportunities to investors for long-term growth through investments in a well-diversified basket of equity securities, primarily of small cap companies. It follows a combination of growth and value format of investing and has a bottom-up investment approach for stock selection.

Inception Date September 09, 2009 
Benchmark Name S&P BSE Small Cap Index
Fund Manager R. Srinivasan
Suitable For Investors who want to remain invested for a minimum of 3-4 years and expect very high returns while having a high risk appetite.

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Consumer Goods 27.88%
Industrial Manufacturing 19.09%
Services 9.13%
Chemicals 7.94%
Cement 7.58%
Construction 6.63%
Financial Services 6.14%
Automobile 3.27%
Cash and cash equivalents 3.36%
Healthcare services 3.18%
Power 1.69%
Textiles 1.42%
Pharma 1.42%
Metals 0.88%
Paper 0.39%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
35.57% 27.16% 9.53% 21.43% 21.68%

Kotak Small Cap Growth

About Fund

The principal objective of Kotak Small cap fund is to generate capital appreciation through investment in various equity & equity related securities of small cap companies. The scheme is designed to offer potential growth benefits offered by small cap securities.

Inception Date February 24, 2005
Benchmark Name NIFTY Smallcap 50 TRI
Fund Manager Pankaj Tibrewal
Suitable For Investors who wish to stay invested for a minimum of 3-4 years and expect very high returns. Also, investors who can bear higher losses.

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Consumer Goods 23.61%
Industrial Manufacturing 15.82%
Chemicals 8.09%
Construction 7.41%
Services 7.10%
Financial Services 5.92%
Information Technology 5.70%
Metals 5.63%
Cement & Cement Products 4.67%
Automobile 4.34%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
47.03% 33.37% 13.84% 20.54% 17.80%

 

Axis Small Cap Fund Regular Growth

About Fund

This is an open-ended equity scheme that primarily invests in small-cap stocks. The primary aim of this scheme is to generate long-term capital appreciation through equity investments in small cap companies. It follows the bottom-up approach of investment. 

 

Inception Date November 11, 2013
Benchmark Name Nifty Free Float Smallcap 100 TRI
Fund Manager Anupam Tiwari
Suitable For Investors who want to remain invested for a minimum of 3-4 years and expect very high returns while having a high risk appetite.

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Construction 21.93%
Chemicals 14.75%
Financial 14.28%
Technology 11.08%
FMCG 10.58%
Healthcare 5.96%
Metals 4.05%
Services 4.02%
Consumer Durables 2.67%
Engineering 2.53%
Diversified 2.14%
Textiles 0.57%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year Since Inception
21.53% 27.43% 14.92% 19.07% 21.99%

ICICI Prudential Small-Cap Fund

About Fund

This is an open-ended scheme which primarily invests in small-cap stocks. It is suitable for conservative investors who have medium-term goals. The aim of the scheme is to generate capital appreciation through investments in equity and equity-related securities of small-cap stocks.

Inception Date October 18, 2007
Benchmark Name Nifty Smallcap 250 Index

Nifty 50 Index TRI

Fund Manager Sanaran Naren

Harish Bihani

Suitable For Conversative investors who want higher returns and have medium term goals. 

 

Sector Allocation

Here is a table of the fund’s percentage allocation of investment across major sectors:

Sectors Percentage Allocation
Finance 15.68%
Construction 10.78%
Software 7.77%
Consumer Non Durables 7.69%
Industrial Products 7.48%
Consumer Durables 7.23%
Cement 5.43%
Chemicals 4.66%
Pharma 4.02%
Media & Entertainment 3.91%
Transportation 3.89%
Healthcare Services 3.86%
Retailing 2.79%

 

Historical Returns of the Fund (annualised)

1-Year 2-Year 3-Year 5-Year 10-Year
33.16% 28.68% 7.51% 16.08% 13.51%

Ways to Invest in Small-Cap Funds 

If you are looking to invest in small-cap funds, you can do so by using the Finity app. Here are some easy steps to follow:

  1. Download and launch Finity app on your smartphone
  2. Click on Équity on the home screen and select ‘small-cap’ option
  3. Click on ‘invest’ against a fund of your choice from the available list
  4. You can either opt for ‘SIP’ or ‘Lumpsum’ investment depending on your preference
  5. Enter the amount to invest
  6. Next, enter your basic details as seen on your phone screen
  7. Complete the payment process to start your investment

 

Things to Consider Before investing in Small Cap Funds

Every investment form has different return and risk profiles. Investing in small-cap funds makes sense for investors who have long-term financial goals. For new investors, here are some factors to consider before making an investment in small-cap funds:

Fund Returns

Every investor would want higher returns from their investment. According to past trends, many small-cap funds may tend to outperform large-cap funds. However, an investor has to carefully select a fund basis his/her financial goals and after studying the historical performance of the specific fund. No fund can guarantee high returns and therefore, investors have to be prepared to face lower returns from small-cap funds too.

Risk 

Small-cap funds can pose a significant amount of risk since they are heavily impacted by market volatility. There is always a high-risk-return tradeoff when it comes to small-cap funds. Therefore, only investors with a high-risk appetite and long-term goals must go for small cap funds. 

Growth potential of stocks 

Small cap funds are ideal to add growth to an investor’s portfolio. These can have tremendous growth potential as compared to large caps which are generally at the peak of the growth curve. Investors must pick funds which invest in stocks of fast-growing companies and have stronger potential to be future market leaders.

Diversification benefits

Mutual funds offer the benefit of diversification to investors, especially those investing in small-cap stocks. This way, investors can balance the risk-return tradeoff and enjoy the benefits of diversification. Investors must try and spread their investment across small cap, mid-cap, and large-cap stocks instead of purely focusing on small-cap funds which are generally high risk.

EndNote

Small cap funds are ideal for investors with a higher risk appetite and long-term financial goals. All Small-cap funds highlight the market risk involved, therefore, investors must carefully analyse their investment objectives against the mutual funds’ before choosing a small-cap fund.


Frequently Asked Questions

Should I invest in small-cap funds?

If you have a good risk appetite and have long-term financial goals, then you can consider investing in small-cap funds. These offer higher growth potential as compared to large-cap funds, but come with associated market risks.

Which are the top small-cap funds in India?

A few of the top-performing small-cap funds are:

  • SBI Small Cap Fund Regular Plan-Growth
  • Kotak Small Cap Growth
  • Axis Small Cap Fund Regular Growth
  • ICICI Prudential Small-Cap Fund

How long should I stay invested in small cap funds?

The thumb rule is that the longer you stay invested in top-performing small cap funds, the higher the returns you can get. The recommended time period for investment in small cap funds is 5 to 7 years.

Is it the right time to invest in small cap funds?

Based on an investor’s asset allocation preferences, a small-cap fund investment can be considered as an investment option, especially for long-term financial goals.

Does it make sense to invest in small cap or large cap funds?

Depending on an investor’s risk profile, he/she can choose either small cap or large cap or both investment options. Large cap funds tend to remain relatively stable during market volatility, and small cap funds offer higher growth potential in the long run.


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Best Midcap Funds for 2021

Home » Mutual Funds » Best Mutual Funds

Best Midcap funds to invest in 2021

Mutual Funds are one of the safest investment options for an investor today. These funds are carefully formulated to provide the investor with maximum returns on their investment. While selecting a fund for investment, the investor needs to consider many factors one of which is the category of funds. There are three broad categories of companies that mutual funds invest in namely, large-cap funds, mid-cap funds, and small-cap funds. Investors can select a suitable investment product depending on their risk appetite, return expectations, amount of investment that they can make, etc. 

Given below are the details of the mid-cap funds and the best mid-cap funds for investment today.

What are midcap funds?

Mid-cap funds are equity mutual funds that invest a minimum of 65% of their assets in companies that have medium market capitalization. This means that the market capitalization of these companies is anywhere between Rs.500 crores and Rs.10,000 crores. Investment in mid-cap companies is a high-risk high-return scenario. These companies have the potential to perform better than the large-cap companies in the time of a bullish market. However, during a bearish market, these investments fall hard.

Things to keep in mind about midcap funds

There are many risks associated with an investment in mid-cap funds. Investors need to have thorough market research and analysis before investing in mid-cap funds. The details of some of the risks associated with mid-caps are mentioned below,

  • Inherent risk

While investment in mid-cap funds is fruitful in long term, mid-cap companies can potentially take a huge hit during bearish times. This is on account of such companies having a low customer base and relatively fewer resources to sustain a heavy economic slowdown. Although the fund managers take due care before investing in any mid-cap company, there is always a high inherent risk that cannot be completely evaded. 

  • Liquidity

Liquidity in any fund is of key importance and it also affects fund returns. Mis caps have relatively fewer shares in the market which makes it difficult to make an immediate exit.

  • Market fluctuations

Mid-cap funds are prone to high volatility at the time of market fluctuations. The fluctuations of the market can lead to a huge decline in mid-cap funds which may not happen in large-cap funds. 

Top midcap funds

  • Kotak Emerging Equity Scheme Growth

About the Fund

Kotak Emerging Equity Scheme Growth is a mid cap fund having investments in equity and equity-related securities in mid cap companies. This is an open ended fund with an exit load of 1% if the fund is sold before the completion of 12 months.

Inception Date 30th March 2007
Benchmark Name Nifty Midcap 100 TRI
Fund Manager Mr. Pankaj Tibrewal
Objective To provide long-term capital appreciation through a portfolio of equity and equity-related securities by investing predominantly in Midcap companies.

 

Sector Allocation

The sector-wise allocation of investments across the fund is tabled below.  

Sectors Percentage Allocation
Industrial Manufacturing 19.81%
Consumer Goods 13.97%
Financial Services 12.91%
Fertilizers and Pesticides 7.29%
Cement & Cement Products 6.7%
Automobile 6.06%
Pharma 5.95%
Construction 5.62%
Metals 4.82%
Chemicals 4.58%
Others 12.29%

Historical Return of the Fund (annualized)        

Period 6 months 1yr 3 yr 5 yrs
Returns 39.98% 30.34% 13.81% 20.63%
  • Edelweiss Midcap Fund Growth

About the Fund

Edelweiss Midcap Fund Growth is another open-ended equity midcap fund predominantly investing in midcap companies that are potential wealth creators. The scheme sleets the stocks to invest in based on careful analysis of the company, its products, growth potential, potential to withstand the downturn of the economy, etc. 

Inception Date 26th December 2007
Benchmark Name Nifty Midcap 100 TRI
Fund Manager Mr. Harshad Patwardhan
Objective To provide long-term capital appreciation through equity portfolio by investing predominantly in Midcap companies.

 

Sector Allocation

The sector wise allocation of investments across the fund is tabled below.  

Sectors Percentage Allocation
Financial Services 23.01%
Consumer Goods 15.57%
Industrial Manufacturing 13.14%
Automobile 10.62%
Fertilizers and Pesticides 4.85%
Construction 4.75%
IT 4.57%
Cement and Cement Products 3.99%
Pharma 3.58%
Chemicals 3.17%
Others 12.75%

 

Historical Return of the Fund (annualized)

Period 6 months 1yr 3 yr 5 yrs
Returns 40.98% 35.16% 12.81% 19.49%
  • Axis Midcap Fund Growth

About the Fund

Axis Midcap Fund-Growth invests in mid-cap companies that have the potential to provide higher returns based on their growth trajectory. The fund has hugely diversified investments across various sectors or industries. 

Inception Date 18th February 2011
Benchmark Name S&P BSE Midcap TRI
Fund Manager Mr. Shreyash Devalkar
Objective To provide long-term capital appreciation through equity and equity related instruments portfolio by investing predominantly in Midcap companies.

 

Sector Allocation

The top sector wise allocation of investments across the fund is tabled below.  

Sectors Percentage Allocation
Financial Services 20.18%
Consumer Cyclical 20.12%
Basic Materials 14.60%
Industrials 12.20%
Technology 11.41%
Healthcare 10.24%
Consumer Defensive 5.98%
Utilities Services 2.95%
Communication Services 2.31%

 

Historical Return of the Fund (annualized)

Period 6 months 1yr 3 yr 5 yrs
Returns 30.93% 27.93% 19.68% 21.23%
  • HDFC Mid-Cap Opportunities Fund

About the Fund

This fund was initiated in the year 2007 and has invested in targetted mid cap companies that have huge growth potential with assessed risk. The fund invests in companies with sustainable growth models, good financial strength, etc that provide a reasonable opportunity for the investors to gain higher returns on their investment.

Inception Date 25th June 2007
Benchmark Name NIFTY MIDCAP 100 TRI
Fund Manager Mr. Chirag Setalvad
Objective To generate long-term capital appreciation through investment in predominantly Midcap companies.

 

Sector Allocation

The top sector wise allocation of investments across the fund is as below.

Sectors Percentage Allocation
Financial Services 20.48%
Engineering  12.06%
Chemicals 13.14%
Consumer Durables  10.10%
Automobile 8.74%
Healthcare 7.75%
FMCG 5.93%
Metals 5.10%
Technology 4.12%
Services 3.95%
Construction 3.40%
Others 5.23%

 

Historical Return of the Fund (annualized)

Period 6 months 1yr 3 yr 5 yrs
Returns 34.77% 28.05% 9.53% 17.71%
  • UTI Mid-Cap Fund

About this Fund

This mid cap fund invests predominantly in mid cap companies that have a higher growth potential than large cap companies. The fund is ideal for investors looking for higher returns but also has an appetite for high risk and can stay invested in the fund for a long term (preferably for at least 5 years). 

Inception Date 7th April 2004
Benchmark Name NIFTY MIDCAP 150
Fund Manager Mr. Ankit Agarwal
Objective To generate long-term capital appreciation through investment predominantly in equity and equity related securities of Midcap companies.

 

Sector Allocation

The top sector wise allocation of investments across the fund is tabled below.

Sectors Percentage Allocation
Consumer Goods 20.55%
Financial Services 15.47%
Industrial Manufacturing 12.4%
Automobile 8.03%
IT 7.29%
Pharma 6.57%
Fertilizers & Pesticides 6.3%
Healthcare Services 5.64%
Technology 4.12%
Services 3.95%
Construction 3.40%
Others 5.23%

Historical Returns of the fund (annualized)

Period 6 months 1yr 3 yr 5 yrs
Returns 35.76% 34.99% 10.16% 16.36%

 

How to invest in Mid cap funds? 

Investing in the midcap funds is very easy now. Investors can simply download the Finity App (available on the Google Playstore as well as Appstore) and start investing by adding basic details like a bank account and providing the necessary KYC. The steps to invest in midcaps through the app are stated below.

  1. The first step is to download the application from the playstore and open it.
  2. The investor will have to login using their email id and phone number to proceed.
  3. After that, the investor will have to provide their bank details and basic KYC to start investing in their chosen midcap fund.
  4. To start the investment procedure after logging in, the investor will have to select ‘Equity’ from the home page and then select ‘Mid Cap’
  5. The investor will be taken to a new page displaying all the available midcap funds and has the option to view the details of any fund (returns, portfolio, fund facts, etc)
  6. The next step is to click on ‘Invest’ 
  7. The investor can select to invest as ‘SIP’ or ‘Lumpsum’ and then enter the desired amount of investment.
  8. After that, the basic details will have to be entered followed by the payment procedure to complete the investment procedure.

Conclusion

Investment in mid cap funds is considered to be a high-risk investment. But these companies have the potential to provide higher returns than large cap companies in the long run. An investor needs to stay invested in this product for a longer period of time (at least 5 to 7 years) for the fund to grow and generate higher returns. Investors can start with an investment amount as low as Rs. 500 per month or lump sum amount of Rs. 5000 in most of these schemes to gradually build a corpus fund that will yield higher returns in long term.


Frequently Asked Questions

What are the three broad categories of mutual funds based on the market capitalization of companies?

The three broad categories of mutual funds based on market capitalization of companies is,

  • Large Cap Funds 
  • Mid Cap Funds
  • Small Cap Fund

What is the minimum investment of a mid cap fund needed in mid cap companies?
Mid cap fund has to invest a minimum of 65% of the fund in the mid cap companies.

Is mid cap suitable for risk averse investors?
Investing in mid cap funds is a high risk high return scenario. It is relatively riskier than investing in large cap funds. Hence it is more suitable for investors with a high risk appetite.

What is an expense ratio for mutual funds?
Expense ratio is the charges levied by the fund to manage the investment portfolio of the investor. It is a nominal charge and is expressed in terms of percentage.

What are the rankings of the stocks invested in the midcap segment?
Mid cap funds segment are the funds that invest in stocks ranking from 101 to 250th in terms of market capitalization  as per the revised guidelines of SEBI.


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Focused Mutual Funds- What are they? Advantages, taxability and returns

Focused funds
Home » Mutual Funds » Best Mutual Funds

Focused Mutual Funds- What are they? Advantages, taxability and returns

Focussed mutual funds are a category of equity mutual funds that invests in a limited variety of stocks. Such funds usually have investments in around 25 to 30 companies or even less. These companies are generally from a few sectors instead of a diversified mix of different sectors like in other equity mutual fund categories. These funds seek to maximize returns by investing in limited but high-performing assets with tremendous growth potential.

As per SEBI guidelines, a focussed mutual fund can invest in up to 30 stocks. However, there are no such restrictions on other equity funds. Different categories of equity funds, generally, have 50 to 100 stocks in their portfolios. Since the investment can be made in a limited number of stocks, the focussed funds are highly method-oriented and have a strategy to select the winners and beat the benchmark returns. 

Advantages of investing in Focussed Mutual Funds

The fundamental objective of equity mutual funds is to give investors the benefit of diversification. But too much diversification does not help investors as it can result in lower returns. This is where focussed mutual funds come in handy. The focussed fund’s approach is to pick the right stocks and earn high returns for the investors.

There is also a downside as far as focussed funds are concerned. There is also an increased risk that the investors are exposed to when the fund aims for high returns. Too much emphasis on a limited group of stocks can either hit the jackpot or completely go against the investors’ interest. To mitigate such risks, fund managers of focussed funds, in general, employ a top-down strategy to select sectors and stocks that are potential outperformers.

 Here are some significant advantages of focussed mutual funds:

  • In-depth research investment option

Fund managers of focussed mutual fund schemes are experts in the sector knowledge in which they invest. They select the stocks of companies only after researching them thoroughly. 

  • Taxation benefits like equity mutual funds

Focussed funds are primarily equity funds and therefore are taxed as equity funds.  The Long Term Capital Gains (LTCG) on such funds are taxed at 10 percent if they are over Rs. 1,00,000. Short Term Capital Gains (STCG) are taxed at a rate of 15 percent.

  • Possibility of higher returns

Since focussed mutual funds invest in a limited variety of stocks, they can generate huge returns with the right investment strategy and stock-picking. The extensive research-backed approach may also help generate returns that may be higher than the broader stock market returns.

  • Clear sectoral and stock segregation

Focussed funds are concentrated funds, and the majority of times, there is a clear segregation of sectors and the stocks they invest in. Such segregation may or may not be there in other types of equity mutual funds.

  • Diversification

Focussed funds can invest in any sector and any company. They are free to choose a large-cap, mid-cap, or small-cap company to invest in. Thus, this gives the added benefit of diversification to the investors. So focussed equity funds can fit well into the satellite asset allocation of investors.

Who should invest in Focussed Mutual Funds?

As we know, focussed funds invest in a small number of stocks, and these stocks can be very volatile. Therefore, focussed mutual funds are suitable for seasoned investors or individuals who have a high-risk appetite. 

Focussed mutual funds have high risk as the returns may be much lower than the benchmarks because of their very nature. So, risk-averse investors or individuals looking for safe investment tools should avoid investing in these funds.  Aggressive investors looking for high returns may consider investing in such funds as they can give high returns. Investors should keep a long-term horizon of at least 5 years to get the maximum benefit from these funds.

If you are looking to invest in focussed mutual funds, here are a few points you should consider:

  • Risk
    As discussed earlier, focussed funds are risky as the entire corpus is invested in a basket of around 30 stocks. The risk is much higher than other equity mutual funds like a multi-cap fund, etc. Investors should understand that the returns earned on their investments may be lower than the market returns or vice versa.
  • Cost
    There is an inherent cost attached to all mutual fund schemes in the form of an expense ratio. The expense ratio denotes the percentage of money used to manage the fund. Investors should check all the funds’ expense ratios and select the one with a low expense ratio. A low expense ratio means higher returns for the investors.
  • Time Period
    As stated earlier, focussed funds can be very volatile in the short term. So individuals should avoid these funds if they are investing for a short period. Thus, these funds are suitable for investors who have the patience to invest for the long term, i.e., at least 5 years.
  • Tax Implications
    The tax treatment on focussed funds is similar to any other equity-oriented mutual fund. If an investor is holding these funds for more than one year, the gains will be long-term and taxed at 10 percent. If the holding period is less than one year, the gains will be taxed at 15 percent. So it is better to invest in such funds for the long term to maximise the returns and tax benefits.

Focussed funds or concentrated funds are high risks funds suitable for experienced investors. But the most significant advantage that stands out is the potential for higher returns. These funds are becoming an attractive option for new age investors as well. Such aggressive investors invest in these funds to beat the market returns over a long period. However, they should consider the risks associated and match them with their risk appetite and financial goals.

How can you invest in Focused funds?

Investing in focussed mutual funds is pretty easy with Finity app (Links to download the app are at the bottom of the page). Finity is a direct mutual fund investment platform where you can invest in direct mutual funds at zero fees and zero commission, keep a track of your portfolio and get smart engine recommendations to make your investment decisions easier.

Investing on the app is pretty easy with the following steps.

  1. Launch the Finity app on your smartphone and select the Equity option on the home screen.
  2. Under the Equity options, navigate to the “Value” option at the bottom of your screen.
  3. The app will then show various time-horizons for investment. Select as per your personal strategy and click on the ‘Invest’ button next to the scheme you are interested in.
  4. Choose between ‘Monthly SIP’ or ‘Lump-sum options.
  5. Enter an amount, select the date for monthly investment and make payment.
  6. Enter basic details and bank details on the next screen to complete the process.

Best Focused funds to invest in 2021

After knowing about how focused funds work and their advantages, are you looking to invest in focused funds? Here are some of the ones our Research team has picked for you.

SBI Focused Equity Fund Growth

About  the fund

SBI Focused Equity Fund Growth  Fund is a focussed equity fund that aims to provide investors with opportunities for long-term capital appreciation by investing in a concentrated portfolio of equity and equity-related instruments. The fund invests a minimum of 65% in equity and equity-related instruments spanning across market capitalization.

 

Inception Date 11 Oct 2004
Benchmark Name S&P BSE 500 Index
Fund Manager R Srinivasan

Top 5 Fund allocation as of Mar 2021

Here is a table of the fund’s percentage allocation of investment across major sectors:

 

Sectors Percentage Allocation
Financial services 22.41%
Consumer Goods 18.51%
IT 9.57%
Automobile 6.8%
Pharma 6.73%

Historical Returns of the Fund (annualised)

1-Year 3-Year 5-Year
8.29% 7.28% 14.35%

Axis Focused 25 Fund Growth

About the fund

SBI Focused Equity Fund Growth  Fund is a focussed open-ended equity fund that invests in just a concentrated portfolio of high conviction ideas across 25 stocks between large, middle, and small-cap companies.

Inception Date 29 Dec 2009
Benchmark Name Nifty 50 TRI
Fund Manager Jinesh Gopani

Top Sector Allocation as of Mar 2021

Here is a table of the fund’s percentage allocation of investment across major sectors:

 

Sectors Percentage Allocation
Financial services 33%
IT 20.2%
Consumer Goods 9.15%
Automobile 8.58%
Pharma 6.5%

Historical Returns of the Fund (annualised)

1-Year 3-Year 5-Year
12.13% 9.79% 16.20%

Principal Focused Multicap Fund 

About the fund

Principal-focused Multicap  Fund is a focussed equity fund that aims to provide investors with opportunities for long-term capital growth by investing in a concentrated portfolio of equity and equity-related instruments. The fund invests in 30 stocks to realize its objective. 

 

Inception Date Nov 2005
Benchmark Name S&P BSE 250 Large Midcap – TRI
Fund Manager Ravi Gopalakrishnan

Top Sector Allocation as of Mar 2021

Here is a table of the fund’s percentage allocation of investment across top 5 sectors:

Sectors Percentage Allocation
Banks 19.9%
Finance 19.2%
IT 10.8%
Petroleum Products 6.61%
Industrial Products 5.6 %

Historical Returns of the Fund (annualised)

1-Year 3-Year 5-Year
31.5% 14.3% 17.47%

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