Large, Mid or Small Cap Fund: How Do You Position Your Portfolio to Ride Out The Market Uncertainty

Posted On Tuesday, Jul 13, 2021

We have all gone through much this second wave!

Now the market is throwing mixed signals.

On one hand it indicates positive recovery triggers such as momentum in vaccination, reducing Covid-19 cases & falling unemployment levels as per CMIE estimates.

However, there is a looming probability of a third wave and downside risks such as rising inflation. Where do you invest during this time - large caps, mid-caps, or small caps.

Corporate India: Larger Companies Are Faring Better

Listed Companies Are Faring Better

Source: CMIE- Economic Outlook, Data as on Mar 2021


Smaller companies were impacted most during the Covid-induced macro shocks.

In contrast, large listed companies survived better in FY 2021.

What worked in favour for them? A stronger balance sheet, better cost controls, and business continuity measures.

Market Performance of Large caps vs Mid-caps & Small caps

Now, if you look at the performance of all the indices (Mid Cap, Small Cap & Large Cap), you might see better numbers in the 1-year performance of small caps or midcaps.

But in the long haul, say 10 years, the large cap performance is similar to the other two indices and is more stable which means lower volatility.

Index1 yr3 yr5 yr10 yr
S&P BSE Large Cap TRI55.07%14.94%15.17%12.23%
S&P BSE Mid Cap TRI74.42%14.72%15.24%14.11%
S&P BSE Small Cap TRI105.38%17.51%17.44%13.25%
Source: BSE Indices as of Jun 30, 2021.
Past performance may or may not be sustained in the future.

 Annualized Risk
Parameters3
YEAR
5
YEAR
10
YEAR
S&P BSE LargeCap TR21.97%18.38%17.44%
S&P BSE MidCap TR25.88%22.26%21.08%
S&P BSE SmallCap TR29.74%25.60%24.44%
Past performance may or may not be sustained in the future.

 Annualized Risk-Adjusted Return
Parameters3
YEAR
5
YEAR
10
YEAR
S&P BSE LargeCap TR0.680.830.7
S&P BSE MidCap TR0.570.680.67
S&P BSE SmallCap TR0.590.680.54

Risk is defined as standard deviation calculated based on total returns using monthly values.
Past performance may or may not be sustained in the future.


Large caps generally are better posed for upward growth over the long term, along with protection from downside, because of their strong fundamentals.

Here are 4 reasons investors generally prefer large cap companies:


On the other hand, if you are looking at a balance of risk with reward, you can look at building a diversified mutual fund portfolio which is market-cap agnostic and varying across styles.

Watch our recent webinar video on Pandemic Impact, Economic Recovery. Investment Strategy - Insights Revealed! where Sorbh Gupta, Fund Manager, Equity & Chirag Mehta, Sr. Manager, Alternative Investments share further insights into the discussion.


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