UTI Large Cap Fund: Long Term Wealth Creation

As per SEBI guidelines, the top 100 stocks in India by market capitalization are called Large Cap stocks. Large cap funds invest at least 80% of their assets in large cap stocks. UTI Large Cap Fund is the oldest of all the existing equity schemes in India with a vintage of nearly 40 years.

The current market context

The market is in a consolidation phase after the Trump Administration announced a 90 day pause in counter tariffs. Volatility again gripped the market after the terrorist attack in Pahalgam and subsequent military action. The market recovered after ceasefire was agreed between the two countries and showing resilience despite US Sovereign rating cut by Moody's. The Sensex is back above the psychologically important 80,000 level.

Why large caps in the current scenario?

The year 2024 was great for midcap and small cap stocks as both the market cap segments outperformed the large cap segment. The outperformance of midcaps and small caps attracted huge retail investments which raised concerns about valuations. Though valuations have come down from their peak, large cap valuations are much more reasonable compared to midcap and small caps.

Source: National Stock Exchange, Period: 01.09.2024 to 30.04.2025

Due to the current market situation, investors should focus on asset allocation and not get over-extended in any one asset category. Historical data shows that large caps have performed better than mid and small caps during periods of drawdown (see the chart below). Large Cap Funds have the potential of providing stability to your portfolio during volatile markets.

Source: Advisorkhoj Research, Period: 1^st May 2015 to 30^th April 2025

Why should large cap be part of your core portfolio?

1. During economic downturns and recessive markets, Large Cap funds are likely to face fewer financial upheavals. Large Cap Companies are market leaders in their respective industries and can weather volatility better than the mid or small cap companies.


2. Large cap stocks tend to be less volatile than midcap and small cap stocks, especially in deep corrections or bear markets. The chart below shows the biggest drawdowns in the market over the last 20 years. You can see large caps suffered less drawdowns compared to small / midcaps.
   
   

   

   Source: National Stock Exchange, Advisorkhoj Research



3. Large Cap stocks are highly liquid. One of the biggest advantages of liquidity in large cap funds is that the fund manager can meet redemption pressures without incurring high impact costs. Impact cost is the cost that a buyer or seller of stocks incurs while executing a transaction due to the prevailing liquidity condition on the counter. A major disadvantage of stocks with low liquidity is that the fund manager may have to sell a stock at a much lower price to meet redemption needs.


4. Since midcaps and small caps have relatively less free-floating shares, their trading volumes are thinner. As a result, the prices of these stocks can run up much higher – high demand and less supply. Large caps, on the other hand, do not have this problem because there is always a good supply of shares in large cap stocks due to high public ownership (institutional and retail).


5. The Indian economy has strong resilience amidst slowdown in other major economies. Fitch has revised FY 2025-26 GDP growth from 6.2% to 6.4%. As per IMF projections given in its World Economic Outlook database for April 2024 are right, India will overtake Japan to become the fourth largest economy in the world by 2025 and likely to overtake Germany to become the third largest by 2027*. The changing global supply chain dynamics is likely to benefit Indian companies. In the medium to long term, large cap Indian companies are likely to benefit from the structural reforms made by the Government.
   
   

   *As per IMF (International Monetary Fund) Estimate

Wealth Creation with UTI Large Cap Fund

If you had invested Rs 1 lakh in UTI Large Cap Fund 20 years back (as on 1.8.2005), the value of your investment would have grown to Rs 11.93 lakhs as on 23^rd May 2025.

A monthly SIP of Rs 10,000/- started in the fund on the same date 20 years back would have accumulated a corpus of Rs 97.22 lakhs as on 23^rd May 2025, with a cumulative investment of Rs 23.8 lakhs (see chart)

Source: Advisorkhoj research as on 23^rd May 2025

SWP with UTI Large Cap Fund

Large Cap funds are often chosen for their resilience in susceptibility to equity market volatility. Since the Large cap funds have large established companies in their holdings, they weather a volatile market better. Hence, Large cap funds are a good choice for building a retirement portfolio over the long term. The fund can prove to be a good choice even for your regular income needs during retirement.

If you had started an SWP with a lumpsum investment of Rs 50 lakhs in UTI Large Cap Fund on 1^st May 2010, with a monthly withdrawal of Rs 50,000, the market value of your balance units as on 1^st May 2025 would have been Rs 1.16 crores, in spite of having withdrawn an amount of Rs 54 lakhs (more than your investment amount) cumulatively over the last 15 years.

Source: Advisorkhoj research as on 1^st May 2025

Rolling Returns: Fund outperformance Vs Category

The chart below shows the 3 year rolling returns of the fund Vs its category over the last 20 years (as on 23^rd May 2025). You will notice that the fund has outperformed its category average over most of the period. The fund gave an average return of 11.91% compared to the 8.57% of the Large Cap category.

Source: Advisorkhoj research as on 23^rd May 2025

Limited Drawdown in Volatile times

The chart below shows the drawdowns in the UTI Large Cap Fund Vs the large cap benchmark Nifty 100 TRI during the over the last 1 year. You can see that the fund had smaller drawdowns compared to the large cap benchmark.

Source: Advisorkhoj Research. Data as on 30^th April 2025

Current portfolio positioning

The UTI Large Cap Fund maintains a well-diversified portfolio and avoids sector as well as stock concentration. The Fund takes a top-down view for sector active weights and then uses bottom-up approach for stock selection.

Source: UTI MF Factsheet (as on 30^th April 2025)

Who should invest in UTI Large Cap Fund?

• Investors looking for capital appreciation over long-term investment horizon.


• Investors with high-risk appetites.


• Investors with minimum 5 years investment tenures.


• This fund can be suitable for new / first time investors.


• You can invest either in lump sum or through SIP.

Investors should consult with their financial advisors or mutual fund distributors if UTI Large Cap Fund is suitable for their investment needs.