Nippon India Large Cap Fund: Seeking High Growth Opportunities

Launched in August 2007, the Nippon India Large Cap Fund initially targeted investments in both large and mid-cap stocks, focusing on the top 200 companies. In 2018, it was reclassified as a Large Cap Fund to meet SEBI guidelines. Despite this change, the fund continued to favour large-cap stocks while maintaining a tactical exposure to mid-cap segments. Nippon India Large Cap Fund experienced a challenging phase from 2019 to 2020, where its investments took time to yield returns. However, it has since demonstrated a remarkable turnaround, emerging as one of the top quartile performers in its category. The fund has notably capitalised on high-conviction bets in sectors such as Banking, Engineering, Manufacturing, Hotels, and PSUs, contributing to its strong performance.

Under the stewardship of Mr Shailesh Raj Bhan, Nippon India Large Cap Fund's NAV has seen an impressive CAGR of 21.4% over the last five years, compared to the benchmark BSE 100 - TRI's CAGR of 18.3%. An investment of Rs 10,000 in Nippon India Large Cap Fund five years ago would have grown to Rs 26,415, surpassing the benchmark's valuation of Rs 23,151. The fund's performance reflects its ability to leverage market rallies and its strategic sectoral allocations. It employs a disciplined investment approach, focusing on fundamentally strong large-cap stocks with growth potential, while selectively incorporating mid-cap opportunities to enhance returns.

The fund's recent success is backed by its robust risk management and adaptability to market conditions. Nippon India Large Cap Fund's long-term performance, coupled with its strategic sectoral picks and proactive management, positions it as a strong choice for investors seeking a blend of stability and growth.

Nippon India Large Cap Fund has a strong track record of long-term performance. Over the past 1 to 3 years, the fund has outperformed its benchmark, the BSE 100 - TRI, by approximately 7.5-9 percentage points on a rolling return basis. It has also consistently led the category returns during this period. This impressive performance stands out, especially when many Large Cap Mutual Funds have struggled to match the benchmark index. The recent success of Nippon India Large Cap Fund has bolstered its long-term performance, with the fund generating a respectable alpha of around 2 percentage points over both the benchmark and the category average over the last 5 and 7 years on a rolling return basis.

In terms of risk and reward, Nippon India Large Cap Fund's volatility (standard deviation) is comparable to that of the benchmark and category average, and it has effectively rewarded investors for the risks taken. This is evident in the fund's strong risk-adjusted returns, as demonstrated by its superior Sharpe ratio.

[Read: Do Large Cap Funds Make More Sense in An Overheated Equity Market?]

What is the investment strategy of Nippon India Large Cap Fund?

Being a Large Cap Fund, Nippon India Large Cap Fund is mandated to hold at least 80% of its assets in equity and equity-related instruments of large-sized companies. Large-cap stocks are defined as stocks of the top 100 companies by full market capitalisation.

Nippon India Large Cap Fund aims to own dominant businesses at reasonable valuations to reduce the risks and generate alpha. While picking stocks, the fund focuses on criteria such as sound management, good track record of the company, potential for future growth, and industry economic scenario. It lays emphasis on companies which are leaders or potential leaders, with well-established business models, sustainable & growing free cash flows, and have high RoE or potentially high RoE. The fund is benchmark-agnostic and the investments are made as per the conviction of the fund manager. They aim to identify high-growth potential and fundamentally sound stocks across industries but that are available at reasonable valuations. The fund managers resist following market momentum and hold each of the high-conviction stock for the long term.

Nippon India Large Cap Fund usually holds around 50-65 stocks in its portfolio. As of September 30, 2024, the fund held 65 stocks in its portfolio, with the top 10 stocks accounting for nearly 48.8% of its assets. The fund's top stock holdings include popular large-cap names such as HDFC Bank, ICICI Bank, Reliance Industries, ITC, and Infosys. Notably, four out of the fund's top 10 holdings belong to the Banking & Finance sector. In the last one year, Nippon India Large Cap Fund's portfolio turnover has ranged 20%-40% of its assets, signifying low churning in the portfolio.

In the last two years, a significant rally in stocks such as L&T, GE Vernova T&D India, Chalet Hotels, Zomato, and HCL Technologies, aided Nippon India Large Cap Fund's significant growth. The fund also benefitted from its holdings in ITC, Tata Motors, SBI, Siemens, ICICI Bank, Mahindra & Mahindra, Axis Bank, Sun Pharma, and NTPC among others.

Nippon India Large Cap Fund is benchmark-agnostic and takes active sectoral bets that are poised to benefit from economic growth. Sector-wise, though the fund's portfolio is skewed towards cyclicals, it also holds substantial exposure to defensive and sensitive sectors. Banking & Finance collectively account for 33.8% of its assets, while Consumption, Infotech, Engineering, Power, Petroleum, Hotels, Pharma, and Auto are among the other prominent sectors in the fund's portfolio.

Is Nippon India Large Cap Fund suitable for my investment goals and risk tolerance?

Nippon India Large Cap Fund focuses on long-term growth by identifying high-growth-potential stocks using a 'Growth At Reasonable Price' strategy. Rather than chasing market trends, the fund seeks out high-growth opportunities within large caps and across different market cap segments.

Although Nippon India Large Cap Fund may not excel in bear markets, it performs well during bull phases. Its balanced approach, which includes a core allocation to fundamentally strong large-cap stocks and strategic investments in mid-cap and small-cap stocks, allows it to generate reasonable alpha and navigate complete market cycles effectively. The fund has also demonstrated its ability to reward investors for the risks they take by delivering solid risk-adjusted returns.

Nippon India Large Cap Fund is suitable for those seeking a large-cap-biased portfolio with a reasonable exposure to midcap and small-cap stocks with a long-term investment horizon of at least 5 years.

Watch this video to explore the top performing Large Cap Funds of 2024:

Note:  This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

The securities quoted are for illustration only and are not recommendatory.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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