Large Cap Stocks – Definition, Types, Features, Benefits of Large Cap Shares

Stocks in the stock market are often classified based on their market capitalisation as large-cap, mid-cap, and small-cap stocks. This categorisation helps investors to make informed investment decisions.

Market capitalisation refers to the total number of outstanding shares of a company in the market multiplied by the current price of each share. It is a measure of the estimated valuation of a company.

Let us now understand the Large Cap meaning.

What is a Large Cap Stock?

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.

Nifty50 hosts the top 50 Indian large cap stocks and these stocks are also traded on the BSE.

These are typically the biggest and most established companies in the market. Investing in these stocks can be a good way to start investing in the stock market, as they offer stability and safety due to their size and long-term track record.

Best Indian Large Cap Stocks List of 2023

Here are the best Indian Large Cap Stocks of 2023:

The data is from 3rd September 2023.  However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!

Why Invest in Large Cap Stocks?

Adding large-cap stocks to an investment portfolio offers the advantage of stability. These companies, being large and well-established, are less likely to face insolvency or a complete halt in revenue-generating operations due to business or economic circumstances. In contrast, small- or mid-cap companies lack this level of stability, presenting higher investment risk.

Furthermore, large-cap stocks, valued at over $10 billion in the market, are considered more stable and mature investments. Consequently, they tend to exhibit lower volatility, enjoy greater analyst coverage, and often offer a consistent dividend stream.

Top 3 Large Cap stocks in India.

Here is a brief overview of the top 3 Large Cap Stocks in India:

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.

 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. Over the past year, RIL’s share price reached a 1-year high of 2630.95 and a 1-year low of 1979.13.

Axis Bank Ltd.

Axis Bank Limited (the Bank) provides a suite of corporate and retail banking products. The Bank’s segments include Treasury, Retail Banking, Corporate/Wholesale Banking and Other Banking Business. According to NSE data, Axis Bank traded 2 shares in the last transaction. Over the past year, Axis Bank’s share price reached a 1-year high of 998.00 and a 1-year low of 707.70.

Investing in large cap shares with smallcase

You can also invest in a basket of large cap stocks via smallcase. Simply go to smallcase.com or the smallcase app, and login via your phone number. Then, go to ‘Discover‘ and enter ‘largecap‘ in the search bar and hit enter. You’ll find an array of stock portfolios that have large cap companies. You can filter the choices based on minimum investment amount, volatility, or the theme of the smallcase. Just pick the one that fits your investment criterion.

The S&P BSE LargeCap is designed for the large cap segment of India’s stock market.

Make sure that you do your diligent research before picking the right stock, keeping in mind your long-term investment goals and risk appetite. 

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.

What are the Various Features of Large Cap Shares?

• Low volatility: The stocks of these large companies are less volatile as they have a strong record of robust financials
• 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.
• High liquidity: Large cap companies are the most liquid, due to their popularity and readily available buyers. 

• 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.

What are the Examples of Large Cap Shares?

Here are a few examples of the most popular global and Indian large cap stocks:

• Amazon 
• Apple
• Nike
• Hindustan Unilever Ltd.
• Wipro Ltd.
• Axis Bank Ltd.

Disadvantages of Investing in Large Cap Stocks

While there are many benefits to investing in large cap stocks, there are also some potential disadvantages to consider. These include:

1. Limited growth potential: Large cap shares are often well-established companies with a large market share, which means they may not have the same level of growth potential as smaller, high-growth companies.
2. Limited diversification: While investing in large cap shares can help diversify your portfolio, it may not provide enough diversification if you are only investing in a few large cap companies.
3. Vulnerability to market trends: Large cap shares are often included in major stock market indices, such as the S&P 500, which means their performance is heavily influenced by market trends.

Advantages of investing in Large Cap Stocks

There are several benefits of investing in large cap stocks:

1. Stability and safety: Large cap companies are generally well-established and have a proven track record of success. They have been around for many years and have weathered multiple economic cycles. This makes them a safer investment option compared to smaller companies.
2. Potential for long-term growth: While large cap companies may not grow as fast as small-cap or mid-cap companies, they still have the potential for long-term growth. These companies are often leaders in their industries and have the resources and expertise to continue growing and innovating.
3. Diversification benefits: Investing in large cap stocks can help diversify your portfolio. These stocks tend to be less volatile than small-cap or mid-cap stocks, which can help balance out your portfolio and reduce overall risk.
4. Historical performance: Large cap shares have a long-term track record of performing well. The S&P BSE Large Cap index, which tracks the performance of large cap shares in India, has delivered an average annual return of over 13% over the past 10 years.
5. Dividends as passive income: Regardless of market condition, large-cap companies pay regular dividends to their shareholders, and it is considered one of the great ways to earn passive income. 
6. Ideal for long-term investment: You must add large-cap stocks with strong fundamentals and future growth to achieve a diversified portfolio. Your asset allocation in the portfolio relies on your risk appetite. If you are a conservative investor who does want to take much risk can allocate most of your capital to large-cap stocks.

Who Should Invest in Large Cap Stocks?

• Expensive stocks: Large cap stocks are often more expensive than other types of securities due to their strong market position and low P/E ratio. As a result, blue chip stock share prices might not be ideal for novice investors.
• Not ideal for short-term investors: Large cap companies don’t see exponential growth in their stock prices in the short term. However, they provide outstanding returns over years or decades.

Large cap companies can serve as the foundation of a broader portfolio, but they shouldn’t often make up for the whole of one’s holdings.

An investor should think about buying mid-caps and small-caps as well within a portfolio’s allocation to equities. Wealthy retirees and experienced investors favour blue-chip companies, but most novice investors avoid them. The rationale is that while poor short-term returns are not appealing to investors wanting to earn rapid money, pensioners, for whom the security of their cash is considerably more essential, will benefit greatly from these investments due to their low risk. Similar to this, investors who may not need to access their money right away find long-term possibilities appealing.

What is the Best Time to Invest in Large Cap Stocks?

The best time to invest in large cap stocks is when the market is down or undervalued. This is because large cap shares tend to be less volatile and are less likely to drop in value as much as small-cap or mid-cap stocks during a market downturn. Additionally, it’s important to remember that investing in the stock market is a long-term game, so it’s best to invest consistently over time rather than trying to time the market.

To Wrap It Up…

In conclusion, large-cap shares can be a valuable addition to any investor’s portfolio. With their long track record of stability and profitability, as well as their potential for long-term growth and diversification benefits, large cap stocks offer several advantages to investors.

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