<p>Large cap mutual funds invest a minimum of 80% of their net assets in large-cap companies, generally referred to as blue-chip companies. Whereas, mid-cap companies must invest at least 65% of their net assets in mid-cap stocks.</p>
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<p>As per the guidelines of the Securities & Exchange Board of India (SEBI), large-cap companies occupy the top 100 ranks in terms of the full market capitalisation of the company, whereas the mid-cap companies feature among the 101 to 250 ranks on the same list. While both these categories of funds are categorised under equity mutual fund schemes, they tend to differ on specific parameters.</p>
<h2 style="font-size: 21px;">Differences between large-cap and mid-cap mutual funds:</h2>
<h3 style="font-size: 18px;">1. Market capitalisation criteria</h3>
<p>SEBI classifies the companies into large caps, mid-caps and small caps based on their market capitalisation. Such a list is updated on a half-yearly basis by the Association of Mutual Funds in India (AMFI). As per the classification during the six months ended 30 June 2022, the companies with a market capitalisation of ₹47,460.72 crores and above were part of the large-cap companies, while the mid-cap companies had a market capitalisation from ₹16,441.47 crores to ₹47,228.23 crores Source: <a href="https://www.amfiindia.com/research-information/other-data/categorizatio… </a></p>
<p>As such, the majority portfolio of <a href="https://www.utimf.com/mutual-fund-products/equity-funds/uti-mastershare… cap mutual funds</a> may be expected to be in the companies with market capitalisation higher than ₹47,460.72 crores, while the majority portfolio of mid-cap companies will comprise of mid-sized companies having market capitalisation from ₹16,441.47 crores to ₹47,228.23. Thus, the difference in large cap and mid cap is based on marketing capitalisation as classified by the regulator.</p>
<h3 style="font-size: 18px;">2.Volatility</h3>
<p>Considering their sensitivity to market movements and turbulence, the performance of mid- cap companies may be more volatile. In contrast, large-cap companies may be relatively stable. This is because large-cap companies have a cushion of financial strength, while the mid-cap companies are generally on the path of growth.</p>
<h3 style="font-size: 18px;">3. Risk profile</h3>
<p>Considering the relative volatility in mid-cap funds, such mutual funds may be more suitable for investors with moderate to aggressive risk profile. On the other hand, large-cap funds may be more suitable for conservative investors seeking equity exposure.</p>
<h3 style="font-size: 18px;">4. Investment horizon</h3>
<p>While the financial performance of large-cap companies may reflect yearly growth consistently, the performance of mid-cap companies may be cyclical, which may take a relatively long period for showing the desired growth. As such, mid-cap funds should be considered suitable for longer investment horizon, while large-cap funds are preferred for even medium to large term investments in equities.</p>
<h2 style="font-size: 21px;">Table of Difference: Large Cap Mutual Funds vs Mid Cap Mutual Funds</h2>
<table border="1" cellpadding="1" cellspacing="1">
<tbody>
<tr>
<td>Parameter</td>
<td>Large Cap Mutual Fund</td>
<td>Mid Cap Mutual Fund</td>
</tr>
<tr>
<td>MarketCapitalizationCriteria</td>
<td>Large cap mutual funds majorly invest among the top 100 companies in terms of market capitalisation.</td>
<td>Mid cap mutual funds majorly invest among the companies lying in the market capitalisation range of 101- 250.</td>
</tr>
<tr>
<td>Volatility</td>
<td>Large cap mutual funds may be relatively less volatile as the companies part of these mutual fund schemes may be well established.</td>
<td>The volatility metric of mid cap mutual fund may be more than large cap funds as the companies are in the growth stage, and risk metric may be relatively higher than large cap funds.</td>
</tr>
<tr>
<td>Risk Profile</td>
<td>Large cap funds have low to moderate risk profile.</td>
<td>Mid cap funds have a moderate to high risk profile.</td>
</tr>
<tr>
<td>InvestmentHorizon</td>
<td>Companies in the large cap fund have a huge market capital so their yearly growth may be consistent, but the rate of growth may be minimal.</td>
<td>Companies in the mid cap mutual funds have a potential for better growth in short term, however, they have a relatively higher risk factor than large cap funds.</td>
</tr>
</tbody>
</table>
<h2 style="font-size: 21px;">Taxation of large cap funds and mid cap funds</h2>
<p>Both, large-cap funds and mid-cap funds, invest a minimum of 65% of their net assets in equity shares and equity-related securities. As such, all the <a href="https://www.utimf.com/">mutual fund</a> schemes under these two categories may be classified as <a href="https://www.utimf.com/articles/equity-oriented-mutual-fund-schemes-expl…; mutual funds for taxation & any appreciation in investments in these funds is taxable as ‘Capital Gains’</p>
<p>If the investment period in these funds is less than 12 months, the gains are taxable as Short-Term Capital Gains (STCG) and taxed at 15%. On the other hand, if the investment period is 12 months or more, the gains are classified as Long-Term Capital Gains (LTCG) and taxed at 10% without any indexation benefit (after Rs. 1 lakh exemption in respect of the aggregate LTCG on equity shares and equity-oriented mutual funds).</p>
<p>If an investor is facing a dilemma in terms of investing in large-cap funds or mid-cap funds, the differences between these funds, as discussed above, may certainly help the investors make an informed decision.</p>
<p><em><strong>Note</strong>: The tax rates, as mentioned in the article, are for illustrative purposes only, and are updated as per the Union Budget 2020 passed by the Parliament. The tax rates for capital gains will be as per the tax laws applicable on the date of redemption/ sale and not on the date of investment.</em></p>
<p>Disclaimer-</p>
<p><strong>Mutual Fund investments are subject to market risks, read all scheme related documents carefully.</strong></p>
<p>The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. In view of the individual nature of the tax consequences, each investor is advised to consult his or her or their own tax consultant with respect to specific tax implications arising out of their participation in the Scheme. Income Tax benefits to the mutual fund & to the unit holder is in accordance with the prevailing tax laws/finance bill 2020. Any action taken by you on the basis of the information contained herein is not intended as on offer or solicitation for the purchase and sales of any schemes of UTI mutual Fund. Please read the full details provided in SID and SIA carefully before taking any decision.</p>
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