Large- and mid-cap funds allow investors to get exposure to both large-cap and mid-cap stocks through a single investment. They combine the relative stability of large-cap companies with the higher growth potential offered by mid-cap businesses.
So, let’s understand what large-and mid-cap funds are, the top 5 funds in this category based on alpha, and the key benefits and risks of investing in them.
What are large- and mid-cap funds?
Large- and mid-cap funds are equity mutual funds that are required to invest at least 35% of their assets in large-cap stocks and at least 35% in mid-cap stocks.
Large-cap companies include the top 100 companies based on market capitalisation, while mid-cap companies include those ranked between 101st and 250th. These funds combine the growth potential of mid-cap companies with the stability of large-cap companies.
These funds bring together well-established companies and growth-oriented businesses, thereby helping you achieve wealth-creation goals over the long-term.
Top 5 large- and mid-cap funds by alpha
Here is the list of the top 5 large-and mid-cap funds that have generated the highest alpha in this category.
| Fund Name | Alpha (%) | Category Average – Alpha (%) | Large Cap Allocation (%) | Small Cap Allocation (%) |
| Motilal Oswal Large and Midcap Fund | 10.49 | 3.08 | 36.34% | 37.31% |
| Invesco India Large & Mid Cap Fund | 8.90 | 3.08 | 41.13% | 37.70% |
| Bandhan Large & Mid Cap Fund | 8.87 | 3.08 | 41.12% | 38.15% |
| HSBC Large and Mid Cap Fund | 7.23 | 3.08 | 37.00% | 45.88% |
| Quant Large and Mid Cap Fund | 6.24 | 3.08 | 45.64% | 52.18% |
*Data as on May 31, 2026, Direct Plans, Source: Value Research
Alpha measures the extra return generated by a fund over its benchmark index after adjusting for the level of risk taken. It reflects the fund manager’s ability to generate superior returns through active investment decisions.
A fund with an alpha higher than its category average indicates that it has delivered superior risk-adjusted returns compared to its peers.
Apart from alpha, you can also evaluate a fund’s long-term performance by reviewing its 5-year and 7-year returns. The expense ratio is another important factor, as lower costs can help improve total returns over time.
Additionally, you can check the portfolio allocation to understand the fund’s exposure to large-cap and mid-cap stocks. This will tell you the bifurcation between stability and growth strategy of a fund. Reviewing the top 5 holdings and their distribution across sectors can further help you assess the fund’s investment strategy and risk profile.
Difference between large- and mid- cap funds vs large-cap funds vs mid-cap funds
Large-cap funds, mid-cap funds, and large- and mid-cap funds differ in their portfolio allocations and risk-return profiles.
Large-cap funds are required to invest at least 80% of their assets in the top 100 companies by market capitalisation, making them relatively more stable but offering lower exposure to the high growth potential typically associated with mid-cap companies.
In contrast, mid-cap funds allocate at least 65% of their portfolio to companies ranked between 101st and 250th by market capitalisation, which offer higher growth potential but also carry greater volatility and risk.
Large- and mid-cap funds sit between these two categories. They are required to invest a minimum of 35% each in large-cap and mid-cap stocks, allowing investors to benefit from both the stability of large- cap companies and the growth opportunities of mid-caps.
Benefits of investing in large- and mid-cap funds
- Large- and mid-cap funds combine the stability of large-cap companies with the growth potential of mid-cap businesses, helping you benefit from different market conditions.
- These funds provide diversification across market capitalisations and sectors, reducing dependence on a single segment of the market.
- They tend to be less volatile than pure mid-cap funds, as the large-cap allocation can help cushion the impact of market downturns.
- Large- and mid-cap funds are ideal for investors with a longer investment horizon, say 5–10 years.
Risks in large- and mid-cap funds
- Large- and mid-cap funds are exposed to market risk like any other equity fund. This means that they can experience significant declines during broad market corrections.
- These funds may go through extended periods of underperformance, especially when mid-cap stocks fall out of favour or generate poor returns.
- They can be more volatile than pure large-cap funds due to their allocation to mid-cap companies, which tend to witness sharper price fluctuations.
Disclaimer: This is purely for educational/ informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.
