“Dive into the world of equity mutual funds in India, exploring types like large cap, mid cap, small cap, multi cap, sector/thematic, and international/global funds. Analyze their performance over various periods to make informed investment decisions.
Equity mutual funds are among the top mutual funds in India. These funds invest the pooled money from investors in stocks and equity shares of companies. There are different types of equity funds available in the Indian market based on their investment style and approach. In this article, we will explore some of the major equity fund categories and analyze their performance over different time periods.
Large cap funds
Large cap funds invest at least 80% of their assets in large-sized companies whose market capitalization is among the top 100 companies listed on the stock exchanges. These are generally considered blue-chip companies with an established market presence, brand and financial strength. Large cap funds aim to provide moderate returns with relatively lower risk compared to mid and small cap funds.
Mid cap funds
Mid cap funds invest in mid-sized companies with a market capitalization that ranks between 101st to 250th company listed on the exchanges. Mid cap stocks have higher growth potential compared to large caps but also come with higher risk.
Small cap funds
Small cap funds predominantly invest in companies ranked below the top 250 and have a market capitalization of less than Rs. 5000 crore. These stocks offer the highest returns but also have considerable volatility and risk associated with them.
Multi cap funds
Multi cap funds have the flexibility to allocate their portfolio across companies with different market caps – large, mid and small. This helps them enhance returns while also managing risk better compared to pure play cap funds.
Sector/thematic funds focus their investments within specific industries or themes which are expected to benefit from evolving business opportunities and trends. For example, some popular sectors funds are focused on banking & financial services, pharma, technology etc.
International/global funds provide Indian investors an opportunity to diversify globally. They invest a part of their corpus in international markets through direct overseas investments or participation in foreign ETFs and index funds. Recent years have seen improved performances of global equity funds in India compared to domestic counterparts.
The performance of equity mutual funds in general has been positive over the long run. On an average, equity funds tend to generate returns that are higher than other traditional investment options like fixed deposits, savings accounts and bonds. However, equity markets are also more volatile in the short term. While large cap funds offer stable returns, mid and small cap funds tend to give higher returns but come with greater risks. Diversifying investments across different fund categories according to one’s risk appetite and time horizon helps boost returns while mitigating risks. Proper fund selection and monitoring also plays an important role in equity mutual fund investments.
Equity funds offer investors access to a professionally managed portfolio of companies across different market caps and sectors. Performance varies depending on market cycles and fund management skills. Investors must carefully consider their risk profile, financial goals and time horizon before selecting the right type of equity fund. Diversifying investments across multiple fund categories can help mitigate fund-specific risks and maximize long term wealth creation. Regular monitoring and review is also advisable for optimal returns.