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Large-cap companies have a market capitalisation of over Rs 20,000 crore. Moreover, they are pretty stable and can handle an economic recession better than medium and small-sized businesses.
These are the stocks of well-established businesses that have a dominant market share. For example, TCS with market cap well over Rs eleven lakh crore is a dominant player in the IT space, while HUL with similar market cap is a big player in the FMCG industry in India.
SEBI has defined large-cap companies as the 1st to 100th companies based on market capitalisation on India’s leading stock market indices, such as the Nifty 50 and the BSE Sensex.
Mutual Funds that invest in stocks of companies with large market capitalisation are called large-cap funds. Moreover, many large-cap companies pay regular dividends and are suitable for investors seeking passive income. The top large-cap stocks based on market cap are HDFC, HDFC Bank, TCS, Infosys, RIL, Cipla, Tata Motors, Maruti Suzuki, ICICI Bank, SBI etc..
Large-cap companies are well established and have solid financials and an excellent distribution network. Moreover, many of these companies enjoy an economic moat; a competitive advantage over rivals and peers.
Greater Analyst Coverage:
According to the Companies Act, all companies including large-cap firms must mandatorily disclose their financials. It gives opportunities for stock analysts to study the fundamentals of these companies and recommend their shares to investors.
Mutual Funds prefer large-cap stocks:
Many mutual funds invest in the stocks of large-cap companies as these firms are stable even during an economic slowdown. These stocks have higher liquidity as they are traded regularly on stock exchanges such as the NSE and BSE.
Many investors prefer large-cap stocks as these are wealth creators over the long run. You may consider large-cap stocks if you have a time horizon of three or more years.
Many investors prefer investing in large-cap stocks because of the brand value and strong distribution network of the companies they represent. It leads to a higher demand for large-cap stocks and, consequently, a higher share price.
You may consider investing in large-cap stocks if this is your first time in the stock market instead of mid-cap and small-cap stocks.
For instance, as these companies have solid financials and a strong reputation, they can efficiently handle headwinds in the economy.
You can invest in large-cap stocks to build wealth steadily over time. For example, you can start a SIP in large-cap stocks to attain vital financial goals.
Many large-cap companies have good corporate governance as top shareholders demand adherence to a higher standard.