Large Cap Mutual Funds - Meaning, Features, Risk, Returns, Liquidity

Manish Kothari
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isVerifiedExpertAuthor is a Zfunds Verified Expert
Manish Kothari

Large Cap in Equity Mutual Funds

Equity funds are those mutual funds which invest in equity and equity-related securities of the companies listed on the exchange. These funds are great for achieving capital appreciation or wealth creation as their objective is to achieve long-term capital growth. The equity funds are known for their offering of higher returns over long periods and therefore are riskier than other debt & hybrid funds. There are a total of 10 sub-categories of equity mutual funds, each one having different investment attributes & suitability for investors. Large cap funds is one of the most popular categories of equity funds. Let’s have a detailed look at the offerings of large cap funds.

What are Large Cap Funds ?

Large Cap funds are those equity mutual funds that invest in the equity securities of the companies which fall under the large-cap stocks based on their market capitalization. As per SEBI Categorization, large-cap companies are classified as top 100 companies listed on the exchange in terms of market capitalization. These companies have a good reputation in the market in terms of their steady wealth generation, strong financials, good corporate governance, organized management and regular dividends. Large Cap funds generally have lower risks associated with them as compared to other categories of equity funds.

Features of Large Cap Funds

  • These funds invest in the top 100 companies in terms of market capitalization.
  • Companies with large market capitalization generally have large market shares and therefore are market leaders in their respective sectors.
  • Large-cap companies have to potential to withstand economic turmoil.
  • These funds have the ability to provide high and relatively stable returns over longer periods.
  • Large-cap funds carry lower risks compared to other equity funds.
  • These funds are best suitable for investors who have a moderate to high risk tolerance and wants to create wealth or achieve good capital appreciation over the long term.
  • Returns from these funds are taxable as per the applicable LTCG(Long term Capital Gains) and STCG(Short Term Capital Gains) Tax depending on the holding period of investor.

Major aspects of Large Cap Funds


Large-cap funds invest in companies with a large market capitalization and generally, these companies are leaders in their respective sectors & industry. As these companies have a large market share, they have the potential to withstand the economy slow down and protect themselves from high losses. Thereby, they can act as a backbone for the investor’s portfolio. The large-cap funds experience lower falls as compared to midcap & small-cap funds in the events of crash or fall in markets.


Large Cap funds are highly liquid. An investor can redeem their investment anytime with a few clicks and get the amount deposited in their linked bank account within 2-3 working days.

Redemption Charges

Large Cap funds have the exit load charges which are applicable at the time of the redemption. The exit load is only applicable if redemptions are made in a specified period of time. It can vary from fund to fund. But mostly, it is like 1% of the redeemed amount only when the redemption is done within the period of 12 months from the date of investment.


Large Cap Funds carry lower risks as compared to small-cap, mid-cap, or any other equity funds. These are best suitable for investors who want to invest in relatively stable funds or companies. Also, these funds can provide good stability in an investor’s diversified equity portfolio. 


The large-cap funds have the potential to generate good & relatively stable returns because of their investments in market leaders & top companies. Investors can expect high returns from large-cap fund investments done for longer horizons. As of 15th January 2021, the category average returns of large-cap funds over the last 10 year period have been around 10.74% p.a. 


The returns from the large-cap mutual funds are subject to the capital gain tax under the Income Tax Act. If the units are sold before the 12 months period, then the gains are taxed at an STCG(Short Term Capital Gains) tax rate of 15% and if the units are sold after the period of 12 months, then the gains are treated as LTCG(Long Term Capital Gains). The LTCGs on equity funds is taxed at the rate of 10% on gains above ₹1 Lakh in a financial year.

Who should invest in Large Cap Funds ?

  1. These funds are best for investors who are interested in medium to long-term capital appreciation.
  2. Investors who want the exposure of the equity and equity-related instruments.
  3. These funds are best suited for the investors who want to do long-term investments as these funds are best known for their potential of long-term capital growth.
  4. These funds are recommended for investors who have moderate to high-risk tolerance and want to generate good returns.
  5. Large-cap funds can be a significant part of an investor’s core equity portfolio.
  6. These funds are not for short-term investors. For short-term investments in mutual funds, it would be best to consider debt categories like low duration, ultra-short term funds, etc. depending on their investment horizon.

How to Invest in Large Cap Mutual Funds via ZFunds ?

There are very easy and simple steps to start investing in a Large-cap mutual fund. Follow the below-mentioned steps to start investing:

  1. Create your free account with ZFunds. If you already have an account with ZFunds, you can simply log in to it.
  2. To create an account, you will be required to upload your identification documents which can include an Aadhar card, pan card, Voter ID card, driving license, passport, or any other document which is issued by the central or state government.
  3. You will also be required to upload your address proof.
  4. After that, you just need to select the best fund which suits you as per your investment horizon and risk.
  5. And, then at last you just need to choose whether you want to do lump sum investment or start a sip.

After the successful investment, the units will be allotted and investment will be reflected in 2-3 working days in your ZFunds account.

Frequently Asked Questions (FAQs) - Large Cap Mutual Fund Investment

Q. Where does the large-cap funds invest ?

A. Large-cap funds invest in the stocks of companies that rank among the Top 100 companies in terms of market capitalization. These companies are known as large-cap companies.

Q. What is the minimum tenure for Large Cap funds?

A. These funds do not have any fixed investment tenure. You can stay invested in these funds as per your financial goals & requirements. However, it is recommended to invest for a longer time horizon i.e at least 3-5 years to generate good and stable returns.

Q. What is the minimum amount of investment in large-cap funds?

A. The minimum amount of investment may vary across schemes & fund houses. But generally, the minimum amount required to invest in large-cap funds is ₹500.

Q. Is investment in large-cap funds suitable for short-term investors?

A. Investments in large-cap funds are not recommended for investors with a short investment horizon. They are recommended for investors who have a moderate to high-risk appetite along with an investment horizon of at least 3-5 years.

Q. How are the gains on large-cap funds are taxed?

A. The gains on investments in large-cap funds are taxed as per the holding period of investors. The gains on units sold after 1 year are treated as Long Term Capital Gains (LTCGs) and is taxed at the rate of 10% on gains above Rs.1 lakh in a financial year. And the gains on units sold within 1 year is treated as Short Term Capital Gains (STCGs) and is taxed at the rate of 15% on the applicable gains. 

More Information:

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