Globally, large-cap companies are usually found in the market’s leading benchmark indexes. In the U.S., these indexes include the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite.
Since large-cap stocks represent a significant portion of the U.S. equity market, they are often utilized as core portfolio investments. Characteristics often associated with large-cap stocks include the following.
1. Transparent: Large-cap companies are typically transparent, making it easy for investors to find and analyze public information about them.
2. Dividend payers: Large-cap, stable, established companies are often the companies investors choose for dividend income distributions. Their mature market establishment has allowed them to establish and commit to high dividend payout ratios.
3. Stable and impactful: Large-cap stocks are typically blue-chip companies at peak business cycle phases, generating established and stable revenue and earnings. They tend to move with the market economy because of their size.
What Is a Large Cap :-
Large-cap (sometimes called “big cap”) refers to a company with a market capitalization value of more than $10 billion. Large cap is a shortened version of the term “large market capitalization. Large-cap stocks represent a significant portion of the U.S. equity market and are often used as core portfolio holdings.
Stocks of companies with a market capitalisation of more than ₹20,000 crores are called large-cap stocks. Indian large cap stocks have a history of strong financial performance and are well-reputed in the markets. Many large-cap stocks are also called blue-chip stocks.
Market capitalization is calculated by multiplying the number of a company’s shares outstanding by its stock price per share. Nifty50 hosts the top 50 Indian large cap stocks and these stocks are also traded on the BSE.
Still, large-cap stocks have lower growth prospects than their small- and mid-cap counterparts that are still expanding their market share. The tradeoff is that large-cap stocks are less risky and less prone to wild swings in their stock prices. As a result, large-caps are considered to be a more conservative investment choice than either small- or mid-caps.
Top Large Cap stocks in India. :-
1. Reliance Industries Ltd
Reliance Industries Limited is engaged in refining, manufacturing of refined petroleum products, petrochemicals, including manufacturing of basic chemicals, fertilizers and nitrogen compounds, plastic and synthetic rubber in primary forms. According to NSE data, Reliance Industries (RIL) traded 1 share in the last transaction.
2. Kotak Mahindra Bank Ltd
Kotak Mahindra Bank, listed on the NSE, boasts a robust operating revenue of Rs. 81,495.77 Cr. over the past year. Notably, it demonstrates an impressive 15% annual revenue growth, a commendable pre-tax margin of 29%, and a solid ROE of 13%, making it one of the best large cap stocks for SIP in India.
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3. Infosys Ltd
Infosys achieved an impressive operating revenue of Rs. 152,686.00 Cr. in the past 12 months, showcasing a remarkable annual revenue growth of 21%, a commendable pre-tax margin of 23%, and an exceptional return on equity (ROE) of 31%. It is also one of the best large cap stocks to buy now in the indian stock market.
4. ICICI Bank Ltd
ICICI Bank generated an impressive operating revenue of Rs. 211,158.51 Cr. in the last 12 months. Notably, it achieved an outstanding annual revenue growth of 18%, a commendable pre-tax margin of 25%, and a solid return on equity (ROE) of 16%. This is also one of the best large cap stock to buy now in the Indian share market.
5. Tata Consultancy Services Ltd. (TCS)
Tata Consultancy Services Limited (TCS) is engaged in providing information technology (IT) services, digital and business solutions. According to NSE data, Tata Consultancy Services (TCS) traded 1 share in the last transaction. Over the past year, TCS’s share price reached a 1-year high of 3575.00 and a 1-year low of 2926.10.
Advantages of Investing in Large Cap Stocks :-
– Liquidity
Liquidity refers to how quickly and easily an asset can be bought or sold in the market through your trading account. Large-cap stocks are more liquid than their smaller counterparts. This critical liquidity, especially in volatile market conditions, allows investors and fund managers to make timely portfolio adjustments without fearing material losses.
– Dividend Payments
A trademark of large-cap companies is their ability to provide investors with a steady stream of dividend payments. These companies are usually well-established and generate consistent profits, part of which are passed on to shareholders as dividends. These regular payouts are attractive for investors, particularly those seeking income in addition to growth, offering a dual benefit from their investment.
– Diversification
One core strategy for reducing risk in any investment portfolio is diversification. Large-cap funds do this by investing across a wide range of industries. By spreading investments across various sectors, the negative performance of a single sector has less impact on the overall portfolio. This strategy enhances stability and can protect investors from significant losses during downturns in any particular market segment.
– Capital Appreciation
Capital appreciation is one of the major benefits of investing in large cap stocks. These companies are known for their consistent performance and stability, even in turbulent times. Their stock prices are more stable, with less volatility than those of smaller companies. This stability can lead to reliable growth over time, making large-cap stocks a preferred choice for long-term investors.
Who should invest in large-cap stocks? :-
Large-cap stocks are suitable for investors who make equity investments wisely. Investors disinterested in volatile or wildly fluctuating returns want investment stability. However, you must remember that even the best large-cap funds may not deliver the returns expected in the market compared to mid-cap or small-cap stocks.
Large companies are reputable and trustworthy, generating stable revenues. Therefore, the greatest advantage of investing in large-cap funds is low risk and high stability. Large-sized investment trusts are not significantly affected by market fluctuations and have lower volatility than small- and medium-sized investment trusts.
Large-cap may also consider rebalancing investments to a bigger portion of their investment portfolio to add the desired continuity (from an investor’s perspective) to their investment profile.
Initially, the returns may appear low in the short term, but large-cap funds produce better returns over the long run. Investors are safer in making these investments during economic downturns and market/business downturns.
. Expensive stocks
. Not ideal for short-term investors
. Long-term Capital Growth
. Income Generation
. Reduced Risk
How to Invest in Large Cap Stocks? :-
Any investment portfolio should have an ideal mix of small cap, mid cap, and large cap shares which helps in diversification and minimizing risk in the long run. One can buy top large cap shares in India individually or by buying mutual funds or exchange-traded funds (ETFs) that invest in large cap company.
Growth and value investing strategies are often used when investing in BSE large cap shares.
Funds and ETFs may occasionally own a range of equities and asset types, including large cap stocks. Other times, the funds or ETFs may only invest in large cap companies.
– Research Large-Cap Stocks
Analyze the financial performance and future prospects of companies before investing.
– Consider Large-Cap Mutual Funds
Mutual funds that invest primarily in large-cap stocks offer a diversified and professionally managed option.
– Open a Demat Account
A Demat account is required to hold shares electronically. IND money offers a convenient online account opening process. Open Demat Account :
– Invest Directly
You can directly buy shares of large-cap companies through IND money’s trading platform.
How to buy Large-cap Stocks? :-
One can invest in large-cap stocks simply by buying the corresponding shares on stock exchange. While large-cap shares are considered considerably less risky than other equity investments, an investor should still analyze the fundamentals and carry out thorough research before buying. An investor could use filters to shortlist good quality large-cap stocks.
One can also invest in multiple large-cap companies through investment in a large-cap mutual fund. Large-cap mutual funds are required to invest at least 80% of their total assets in equity and equity-related instruments of large-cap companies. The diversification provided by mutual funds further reduces the risk associated with such investments. You could also consider exchange traded fund that invest in large-cap index.
As a rule of thumb, about 50% of your equity investments should be in large-cap stocks. If you have low risk profile, you should consider a higher allocation to such stocks.
. Safer in a downturn
As these companies have strong fundamentals, they are more likely to withstand a recession without going out of business.
. Pay dividends
Large-cap stocks tend to be dividend-paying stocks, allowing the investors to generate a regular passive income. They do this to compensate the investors for the largely stagnant stock prices as they have the earnings to do so.
. Stability
Large-cap companies have a proven track record and generate stable earnings. Their stock prices may not move as rapidly as mid-cap stocks or small-cap stocks, but they are unlikely to bust out as well.
What are the Various Features of Large Cap Shares? :-
. Offers dividend
Large cap shares distribute quarterly or yearly dividends to their shareholders. Even though the dividend payout might vary depending on the organization’s performance and its expansion goals, dividends are meant to reward the shareholders for their investments and faith in them.
. Liquidity
As mentioned earlier, large-cap stocks are blue-chip stocks with widespread popularity. This popularity, combined with all the above features, makes it far more liquid than other stocks listed on the exchange.
. Volatility
These companies are well-established and financially stable, with extensive supply chain networks. They remain constant throughout the business cycle, making them less volatile than the other market cap categories.
. Ideal for long-term investors
Large cap shares are better investments if you have a longer time horizon since they grow slowly but steadily over time.
. Transparency
Large-cap stocks have been around for decades. Their prolonged track record and established business have increased investor confidence. Investors can analyses a company’s performance over time and witness how the stock has performed under different market scenarios.