Large cap mutual funds have remained under pressure compared to mid cap and small cap funds across multiple time horizons. While mid and small cap categories have generated significantly stronger returns during the broader market rally, large cap funds have struggled to keep pace, particularly in shorter timeframes where returns have remained muted or even negative. However, this recent underperformance by large caps has made investors think about where they should invest for stability.
According to market experts, the recent valuations have made the large cap funds relatively attractive and one must gradually increase the allocation in large cap funds as they provide better stability and reduce the overall volatility in the portfolio.
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Pallav Agarwal, Certified Financial Planner at Bhava Services LLP, told ETMutualFunds that large caps are at more attractive valuations as compared to mid and small cap precisely due to this underperformance and the investors should increase their allocation towards large cap funds both for stability and better returns.
Echoing a similar view, Shivam Pathak, CFP and Founder of Asset Elixir shared with ETMutualFunds that recent underperformance has made large caps relatively attractive from a valuation perspective and investors may consider increasing allocation gradually, as large caps can provide better stability and help reduce overall portfolio volatility.
According to the analysis by ETMutualFunds, large cap funds have underperformed mid caps and small caps in different horizons such as one month, three month, six month, one year, YTD, three years and five years.
The analysis further showed that the performance by large caps has been in the negative territory in shorter time periods and in positive in the longer horizon.
