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How SIPs in Top 6 Best Large Cap Mutual Funds have created wealth over last 12 years

Mutual Funds

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Mutual Funds article in Advisorkhoj - How SIPs in Top 6 Best Large Cap Mutual Funds have created wealth over last 12 years
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In our last three posts in this series we had discussed How SIPs in Top and Best Diversified Equity Mutual Funds have created wealth, How SIPs in Top and Best Mid and Small Cap Mutual Funds have created wealth over last 10 years, and How SIPs in Top and Best ELSS Mutual Funds have created wealth over last 10 years

Today we will discuss How SIPs in large Cap Funds have created wealth for the investors over last 12 years. In our earlier articles in the same series, we discussed the benefits of investing through SIPs. We had also discussed why ELSS should be the preferred choice for tax saving over other tax saving options. Today lets us understand more about large cap funds.

  • As the name suggests, large cap funds invest in shares of large and blue chip companies. Large cap companies are typically companies which have a market capitalization of over 10,000 Crores. Market capitalization of a company is calculated by multiplying the current stock price of the company with the total number of shares outstanding.

  • The construction of the BSE Sensex and NSE itself are based on market capitalisation of top 30 and top 50 companies of India respectively. These companies are generally considered to be safer and less volatile investments compared to mid cap and small cap companies.

  • Foreign Institutional Investors (FIIs) typically invest mostly in large cap stocks. Therefore, FII activity affects large cap stocks more than small and midcap stocks.

  • However, due to the relatively stable nature of large cap stocks, the Large Cap funds have offered lower returns than Mid and Small Cap Funds. However, when compared in totality, Large Cap Funds outperform all other funds by providing stability for risk aversive investors (What schemes will best suit your risk profile?) looking for stable and generous returns in the long term. It is also advisable to invest in Large Cap Funds during volatile markets.

  • Example of some of the common large cap stocks in which Large Cap Funds have invested are – HDFC Bank, Infosys, Reliance industries, Larsen & Toubro, HDFC Ltd., ITC, ICICI Bank and Bharti Airtel etc.

To learn more about investing in Large Cap Funds, we recommend you to read the following –

Should you invest in Large Cap or Midcap Mutual Funds

Can Large Cap Mutual Funds be your Best Investment Option

Best Mutual Fund Consistent Performers in 2015 – Large Cap Funds

Now coming back to the topic of today, we have selected 6 Large Cap schemes that have given the best returns in the last 12 years (based on NAV of 26/5/2016). However, this is, by no means, a comprehensive list of all the large cap funds that gave good returns in the last 12 years. Through this study, we want to show how long term investments in large cap funds through SIPs have created wealth for the investors and how it could probably be the best choice for risk aversive or moderate risk taking investors.

To see the comprehensive list, please click here Top Performing Systematic Investment Plans – Large Cap Equity Mutual Funds

The funds in our selection have given SIP returns ranging from 13.39 - 16.35% annualized. Since SIP investments are made over a period of time, the method of calculating SIP returns is different than that of Lump Sum investments. SIP returns are calculated by a methodology called XIRR, which is a variant of Internal Rate of Return (IRR). XIRR is similar to IRR, except XIRR can calculate returns on investments that are not necessarily strictly periodic.

For our study, we have assumed a monthly SIP of 3000 made on the 26th day of every month starting from June 2004 and ending on 26th May 2016. Therefore, the investor would have invested 4.32 Lakhs through 144 SIP instalments of 3,000 each. Now, let us see how much wealth investors would have accumulated by investing in the top Large Cap Funds. We have taken Regular Plan – Growth option for this study.


Mutual Funds - How much wealth investors would have accumulated by investing in the top Large Cap Funds

Advisorkhoj Top Performing Sip – Large Cap Mutual Funds (data as on 26/5/16 – Regular Plan - Growth Option)


Birla Sun Life Frontline Equity Fund

The Birla Sunlife Frontline Equity Fund was launched in August 2002. This fund from Birla Sun Life Mutual Fund has the second largest AUM base of nearly 11,201 Crores (As on April 30, 2016). This is the most popular and one of the best performing large cap funds now and thus the AUM of this fund has grown rapidly in last few years. The AUM of this fund is very close to the AUM of the biggest large cap fund HDFC Top 200 Fund, which was launched way back in September 1996.

If you had started a monthly SIP of 3000 in Birla Sunlife Frontline Equity Fund in June 2004, by now you would have accumulated a corpus of nearly 12.18 Lakhs with an investment of only 4.32 Lakhs.

You would have accumulated a corpus of 3.13 Lakhs by the end of 2007, 5.26 Lakhs by the end of 2010, 7.44 Lakhs by the end of 2013 and 12.18 at the end of the SIP period i.e. May 2016. Over the 12 year period the compounded annual returns on your SIP investment in this fund would be around 16.35%.

The fund has got excellent rating from valueresearch i.e. 5 Star. CRISIL has also accorded a very good rating – Rank 2, in its recent mutual fund ranking for the quarter ending Mar 31, 2016. The chart below shows the SIP returns of the Birla Sunlife Frontline Equity Fund, Growth option, over the last 12 years.


Mutual Funds - The SIP returns of the Birla Sunlife Frontline Equity Fund, Growth option, over the last 12 years

Source: Advisorkhoj research (comparison of returns with CNX NIFTY and S&P BSE 200)


Read the fund review – This fund has a great track record of wealth creation among large Cap Funds

HDFC Top 200 Fund

Launched in September 1996, HDFC Top 200 Fund is one of the oldest Large Cap Mutual Fund Schemes in India. This fund from the second largest AMC in India, HDFC Mutual Fund has the largest AUM base of nearly 11,990 Crores (As on April 30, 2016). This was one the most preferred fund amongst investors and advisors till a few years ago. But due to its subdued performance in the last few years the choice of investors and advisors have shifted to other better performing funds in this category. Nonetheless, with recovery of markets, the performance of this fund in the last 3 months has come back and currently it is ranked 2 in its category (last 3 months performance – Source: Valueresearchonline).

The funds recent ranking has gone down and currently it is a Valueresearch 3 Star rated fund. Recent CRISIL ranking is also not very encouraging – Rank 5, in its recent fund ranking for the quarter ending Mar 31, 2016. However, the investors should not worry with short term performance of any scheme and also should not change the schemes solely based on change in scheme rankings. The long term performance, rolling and trailing returns and the long term performance of the fund manager in his or her ability to generate alpha should be the criteria before you want to change any scheme.

The chart below shows the SIP returns of the HDFC Top 200 Fund, Growth option, over the last 12 years. If you had started a monthly SIP of 3000 in HDFC Top 200 Fund in June 2004, by now you would have accumulated a corpus of nearly 10.92 Lakhs with an investment of only 4.32 Lakhs.

You would have accumulated a corpus of 2.98 Lakhs by the end of 2007, 5.68 Lakhs by the end of 2010, 6.59 Lakhs by the end of 2013 and 10.92 at the end of the SIP period i.e. May 2016. Over the 12 year period the compounded annual returns on your SIP investment in this fund would be around 14.69%.

You may like to read – Should I continue my SIP in HDFC Top 200 Fund


Mutual Funds - The SIP returns of the HDFC Top 200 Fund, Growth option, over the last 12 years

Source: Advisorkhoj research (comparison of returns with CNX NIFTY and S&P BSE 200)


You may also like to read – Should I continue my SIP in HDFC Top 200 Fund

Franklin India Bluechip Fund

Franklin India Bluechip Fund was Launched in December 1993, this is the oldest large Cap Mutual Fund scheme in India with an AUM base of nearly 6,949 Crores (As on April 30, 2016). This scheme from one of the best asset AMCS in India, Franklin Templeton, is also one of the consistently best performing large cap funds with a very long term track record of 22+ years .

If you had started a monthly SIP of 3000 in Franklin India Bluechip Fund in June 2004, by now you would have accumulated a corpus of nearly 10.71 Lakhs with an investment of only 4.32 Lakhs.

You would have accumulated a corpus of 2.84 Lakhs by the end of 2007, 4.95 Lakhs by the end of 2010, 6.67 Lakhs by the end of 2013 and 10.71 Lakhs at the end of the SIP period i.e. May 2016. Over the 12 year period the compounded annual returns on your SIP investment in this fund would be around 14.40%.

The fund has got excellent rating from valueresearch i.e. 4 Star. CRISIL has also accorded a very good rating – Rank 2, in its recent mutual fund ranking for the quarter ending Mar 31, 2016. The chart below shows the SIP returns of the Franklin India Bluechip Fund, Growth option, over the last 12 years.


Mutual Funds - The SIP returns of the Franklin India Bluechip Fund, Growth option, over the last 12 years

Source: Advisorkhoj research (comparison of returns with CNX NIFTY and S&P BSE Sensex)


You may like to read this fund review - Aamir Khan of Mutual Funds

Kotak 50

Kotak 50 was launched in February 2003. This fund from Kotak Mahindra Mutual Fund has an AUM base of nearly 1,234 Crores (As on April 30, 2016). If you had started a monthly SIP of 3000 in Kotak 50 Fund in June 2004, by now you would have accumulated a corpus of nearly 10.18 Lakhs with an investment of only 4.32 Lakhs.

You would have accumulated a corpus of 3.23 Lakhs by the end of 2007, 4.59 Lakhs by the end of 2010, 6.09 Lakhs by the end of 2013 and 10.18 Lakhs at the end of the SIP period i.e. May 2016. Over the 12 year period the compounded annual returns on your SIP investment in this fund would be around 13.01%.

The fund has got 4 Star rating from valueresearch and CRISIL has given it Rank 3, in its recent mutual fund ranking for the quarter ending Mar 31, 2016. The chart below shows the SIP returns of the Kotak 50, Growth option, over the last 12 years.


Mutual Funds - The SIP returns of the Kotak 50, Growth option, over the last 12 years

Source: Advisorkhoj research (comparison of returns with NIFTY 50 Index)


Tata Large Cap Fund

Tata Large Cap Fund was launched in May 1998. This fund from Tata Mutual Fund has a small AUM of approx 771 Crores (As on April 30, 2016) compared to its peers.

If you had started a monthly SIP of 3000 in Tata Large Cap Fund in June 2004, by now you would have accumulated a corpus of nearly 10.12 Lakhs with an investment of only 4.32 Lakhs.

You would have accumulated a corpus of 3.02 Lakhs by the end of 2007, 4.79 Lakhs by the end of 2010, 6.61Lakhs by the end of 2013 and 10.12 at the end of the SIP period i.e. May 2016. Over the 12 year period the compounded annual returns on your SIP investment in this fund would be around 13.52%.

The fund has got 4 Star rating from valueresearch and CRISIL has given it Rank 3, in its recent mutual fund ranking for the quarter ending Mar 31, 2016. The chart below shows the SIP returns of the Tata Large Cap Fund, Growth option, over the last 12 years.


Mutual Funds - The SIP returns of the Tata Large Cap Fund, Growth option, over the last 12 years

Source: Advisorkhoj research (comparison of SIP returns with CNX NIFTY and S&P BSE Sensex)


DSP BlackRock Top 100 Fund

DSP BlackRock Top 100 Fund was launched in March 2003. This fund from DSP BlackRock Investment Managers is a popular large cap fund with a good AUM base of nearly 3309 Crores (As on April 30, 2016). If you had started a monthly SIP of 3000 in DSP BlackRock Top 100 Fund in June 2004, by now you would have accumulated a corpus of nearly 10.03 Lakhs with an investment of only 4.32 Lakhs.

You would have accumulated a corpus of 3.20 Lakhs by the end of 2007, 5.16 Lakhs by the end of 2010, 6.82 Lakhs by the end of 2013 and 10.03 at the end of the SIP period i.e. May 2016. Over the 10 year period the compounded annual returns on your SIP investment in this fund would be around 13.39%.

The fund has got 3 Star rating from valueresearch and CRISIL has given it Rank 4, in its recent mutual fund ranking for the quarter ending Mar 31, 2016. The chart below shows the SIP returns of the DSP BlackRock Top 100 Fund, Growth option, over the last 12 years.


Mutual Funds - The SIP returns of the DSP BlackRock Top 100 Fund, Growth option, over the last 12 years

Source: Advisorkhoj research (comparison of SIP returns with CNX NIFTY and S&P BSE 100)


You may also like to know how this large cap mutual fund has made a strong comeback

Conclusion

In this article, we have seen how SIPs of Top and Best Large Cap Schemes have created wealth for the investors. SIPs benefit from the power of compounding, and therefore the earlier we start our SIPs, the greater is the potential for wealth creation. However, it is important to select schemes from categories which is best suited to your risk profile (Check your Risk profile here)

Our study of the SIP returns of Diversified Equity Funds and Large Cap Funds shows that schemes of Diversified category gave returns ranging from 19 – 21% in comparison to Large Cap fund schemes which gave return in the range of 13.39 – 16.35%. Therefore, doing SIP in Diversified Equity funds is the best way for creating long term wealth. However, Large Cap Funds are less volatile and best suited to investors who do not to take much risk yet want to enjoy the returns from equity investing!

Before you embark on the journey of wealth creation through systematic investing, it is better to take help of your financial advisor in terms of understanding your risk profile and also the risk return rewards of different category of equity mutual fund schemes. Wishing you a great wealth creation journey.

In the next post in this series, we will discuss How the Best and Top Performing Equity Oriented Balanced Fund Schemes created wealth over long term. Stay in touch.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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Pradip Chakrabarty

Pradip is a first generation entrepreneur who has built a very successful business for distribution of financial products over last 19 yrs. He is also the Founder and CEO of www.advisorkhoj.com. Pradip is well respected in the Financial Services industry and brings deep domain knowledge and leadership skills and is considered as one of the top Investment Advisors in India. He can be contacted at pradip@advisorkhoj.com

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