Large-Cap Valuation Reset: Funds Deliver Steady Returns Over Five-Year Period

Largecap Market Shifts Towards Fair Valuations, Largecap Mutual Funds Stand Out

India's largecap market has been undergoing a significant shift in recent times. The recent correction has brought largecap valuations closer to their long-term averages, making Indian equities more competitive in the process. According to DSP Netra's April edition, largecap valuations have corrected to near their long-term averages of 18 to 19 times earnings, narrowing the valuation gap between India and other emerging markets.

The correction has removed froth from the market, shifting it from expensive territory into fair to average valuation zones. The benchmark Nifty 50 has corrected around 13 percent this year, retreating from its 52-week high of 26,373. In this backdrop, largecap mutual funds continue to stand out for investors looking for relatively stable returns during volatile phases. These funds invest in well-established businesses with stronger balance sheets and more predictable earnings, tending to hold up better than riskier categories.

Largecap Mutual Funds: Consistent Performers

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Moneycontrol has evaluated large-cap funds based on five-year rolling returns to find the most consistent performers. The following table highlights the top-performing largecap funds:

The top-performing funds have delivered returns in the 15 percent to 17 percent range, with a relatively modest outperformance over the Nifty 50. This highlights the importance of consistency in largecap investing, with steady performance and disciplined portfolio construction mattering more than chasing outsized returns.

Fund Profiles

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• Mahindra Manulife Large Cap Fund: This fund has delivered a 5-year rolling return of 16.94 percent, with a relatively higher concentration of about 34.5 percent in its top five holdings. The portfolio is led by large names such as ICICI Bank, HDFC Bank, and Reliance Industries, along with exposure to Bajaj Finserv and Infosys.
• Nippon India Large Cap Fund: This fund has posted a 5-year rolling return of 16.68 percent, with close to 30 percent of its portfolio concentrated in its top five stocks. Its key holdings include HDFC Bank, ICICI Bank, and Reliance Industries, along with Larsen & Toubro and Axis Bank.
• ICICI Prudential Large Cap Fund: This fund has delivered a 5-year rolling return of 16.33 percent, with a relatively higher concentration of about 35.5 percent in its top five holdings. The portfolio is anchored by names such as ICICI Bank and HDFC Bank, along with Larsen & Toubro, Reliance Industries, and Axis Bank.
• Canara Robeco Large Cap Fund: This fund has posted a 5-year rolling return of 16.15 percent, with around 31 percent of its portfolio concentrated in its five stocks. Key holdings are HDFC Bank, ICICI Bank, and Reliance Industries, along with State Bank of India and Larsen & Toubro.
• Baroda BNP Paribas Large Cap Fund: This fund has delivered a 5-year rolling return of 15.23 percent, with about 27 percent of its portfolio concentrated in its top five holdings, including HDFC Bank, Reliance Industries, and ICICI Bank.

The data reinforces a fundamental principle of largecap investing – steady performance and disciplined portfolio construction matter more than chasing outsized returns.