Reviving the Case for Large Cap Investments: Stability, Opportunity, and Momentum

Bengaluru – March 17, 2025 – India’s equity market landscape has seen a remarkable shift over the last few years, with small and mid-cap stocks witnessing unprecedented growth since the COVID-19 pandemic. This surge has been reflected in the explosive rise in demat accounts and mutual fund assets under management (AUM), indicating broader market participation and increased investor interest. Notably, the AUM of mid-cap funds has surpassed that of large-cap funds, and small-cap AUM has reached approximately 92% of large-cap AUM. This shift underlines the current market enthusiasm for higher-risk, higher-reward categories.

Despite this trend, large-cap stocks remain an essential component of a balanced investment strategy. Historically, they have demonstrated resilience during economic downturns and provided stable, long-term returns. The Nifty100 Total Returns Index (TRI) has grown at a compounded annual growth rate (CAGR) of 14.68% over the past two decades, showcasing the steady performance of large-cap companies even amidst market volatility. Additionally, large caps typically exhibit lower drawdowns compared to mid and small-cap segments, making them a safer harbor during turbulent times.

The current market conditions present an attractive entry point for large-cap investments. Valuations in the mid and small-cap segments are trading above their historical medians, suggesting a potential cooling-off period. In contrast, large-cap stocks remain relatively undervalued, with the Nifty 100’s Price-to-Earnings (PE) ratio standing at 22.31 compared to its five-year median of 23.40. Furthermore, the Nifty100/Nifty500 ratio has reached an all-time low, historically signaling a potential rebound and outperformance by large-cap stocks. Large cap contribution to total market capitalization has also dipped to 59.7% as of December 2024 — a historic low — indicating significant room for a reversal as market cycles shift back toward stability and value. Moreover, with foreign institutional investors (FIIs) likely to return after four years of net selling, large-cap stocks stand to benefit from renewed inflows.

Amidst this evolving landscape, Samco Mutual Fund introduces the Samco Large Cap Fund, an open-ended equity scheme predominantly investing in large-cap stocks. What sets this fund apart is its unique C.A.R.E. Momentum Strategy, which combines cross-sectional, absolute, revenue, and earnings momentum to identify high-potential large-cap stocks. By leveraging this innovative approach, the Samco Large Cap Fund aims to deliver superior risk-adjusted returns, offering investors a differentiated opportunity in the large-cap space.