Different Types of Mutual Fund in India (Part-4)

Some other types of funds or terms we usually used at the time of Investment are as follows.

1. Large Cap Funds

2. Mid Cap Funds

3. Small Cap Funds

Large Cap Funds

Large cap funds are a type of equity where funds are invested in a large portion with companies of large market capitalization. These are essentially large companies with large businesses and big teams. Large cap stocks are commonly referred as blue chip stocks. Large cap funds are considered to be safe, have good returns and are less volatile to the market fluctuations compared to other equity funds (mid and small cap funds).

Mid Cap Funds

Mid-cap funds invest in mid-sized companies. Stocks held in mid-cap funds are the companies that are still developing. These are mid-size corporates that lie between large and small cap stocks. When an investor invests in mid caps for a long term, they prefer those companies that they think will be tomorrow’s runway successes. Also, the more the investors in mid-cap stocks, the more it tends to grow in size. Since the price of large caps has increased, big investors like mutual funds and Foreign Institutional Investors (FIIS) are increasingly investing in mid-caps.

Small Cap Funds

Small cap funds take the exposure at the lowest end of the market capitalization. Small cap companies include the startups or firms that are in their early stage of development with small revenues. Many successful small cap firms have eventually grown into large cap companies. Since, small cap stocks give high growth potential, companies in their early stage of development, have great scope of higher developments.

Difference between Large, Mid and Small Cap Funds

Investments: Large cap invests in those companies that have the potential of showing year on year steady growth with high profits. Mid-cap funds invest in mid-sized companies. Investors who invest in mid-cap usually prefer those companies that are future’s runaway success. Whereas, small cap companies are generally younger companies or startups that have a lot of scopes to grow.

Market Capitalization: Large cap companies have a market capitalization of more than INR 1000 crore, while mid caps could be companies with a market cap of INR 500 Cr to INR 1000 Cr, and a market cap of the small cap could be less than INR 500 Cr.

Companies: Infosys, Unilever, Reliance Industries, Birla, etc., are a few well-known large cap companies in India. Some of the most emerging, i.e. mid-cap companies in India are Bata India Ltd, City Union Bank, PC Jeweller Ltd, etc. And some of the well-known small-cap companies in India are Indiabulls, Indian Overseas Bank, Just Dial, etc.

Risks: Mid cap and small cap funds are more volatile than large-cap funds. Large cap mutual funds tend to outperform both mid and small cap funds during the bull market.

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Different Types of Mutual Fund in India (Part-1)Different Types of Mutual Fund in India (Part-2)Different Types of Mutual Fund in India (Part-3)

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