In the broader market corrections over the past 16 months, large-caps have been far more resilient than mid/small-cap stocks.
As stable bluechips with steady cashflows, ability to withstand macro headwinds and generally strong business models have helped them stay a bit more insulated. That said, some large-caps, too, have suffered corrections due to elevated valuations.
The large-cap mutual fund category has been a bit of an average to modest segment as many schemes tend to find it challenging even to match standard benchmark returns.
Consistently beating the Nifty 100 TRI or Nifty 50 TRI has been a rarity with only a handful able to do so over longer timeframes of 5-10 years.
Amidst this background, one of India’s most popular asset management companies that also runs the largest flexicap scheme in the country is rolling out its only other equity offering – a large-cap mutual fund.
The Parag Parikh Large Cap new fund offer (NFO) is open for subscription till January 30, 2026. It promises a low-cost strategy to invest in India’s largest companies.
Should you be investing in this new fund. Read on for our take:
Index plus derivatives
The Parag Parikh Large Cap fund is benchmarked to the Nifty 100 TRI. The top 100 large-cap companies represented 76 per cent of the profit pool among the top 500 listed firms by market capitalisation as of November 2025.
The scheme is expected to work like an index, and not as a heavy churner in search of higher returns
Broadly, five strategies would be applied by the new fund.
First, single-stock futures would be used. So, if a company’s futures price for the near-month trades is lower than what prevails in the cash market, the fund may use futures to create exposure more efficiently via stock-futures arbitrage.
Second, as with stocks earlier, index futures, too, would be deployed if there is an arbitrage opportunity between cash and derivatives markets.
Third, if a Nifty 100 company merges with another firm, the fund may buy the stock at a discount to the merger ratio at a different date for better execution.
Fourth, when the Nifty 100 constituents change, the fund may rebalance gradually and not immediately after the index date for more favourable stock prices.
The fifth strategy is using a low active share. So, when there are corporate actions such as demergers or special situations, the fund may decide on its entries and exits in a phased manner to reduce impact costs while keeping overall active share low (under 10 per cent, according to the fund presentation).
The expense ratio has been kept quite low. It is 0.15 per cent for the direct plan and 0.55 per cent for the regular plan of the new fund. These figures include additional expenses and exclude GST on management fees.
What should investors do?
Barring the stock and index arbitrage parts, and possibly the index rebalancing strategy periodically, there is no certainty on mergers or special situations happening on an ongoing basis, especially when the universe comprises the relatively stable large-caps.
The entire ability of the fund to match or exceed the index returns hinges on the successful execution of the stock and index arbitrage derivative strategies.
In fact, the fund presentation itself says the fund may not suit those wanting to outperform the index significantly or for those looking for active strategies based on fundamentals.
There is no model or backtested data shared, so gauging the likely performance is not possible.
From a longer investment timeframe standpoint, only 13 out of 24 active large-cap funds have outperformed the Nifty 100 TRI on a point-to-point basis over the past 10 years (as of Jan 21, 2026).
On a monthly SIP basis over the past 10 years, the figure improves to 15 out of 24 funds outperforming the benchmark.
For most investors, ICICI Prudential Large Cap and Nippon India Large Cap must be the top choices and can be the core part of their portfolios. Canara Robeco Large Cap and Invesco India Large Cap are other reasonably sound options.
Parag Parikh Mutual Fund’s flexicap scheme has a great track record and a strong value-driven philosophy. Incidentally, that scheme is large-cap heavy.
Given that the new Parag Parikh Large Cap fund seeks to be more of an index-like scheme with arbitrage opportunities potentially providing the kicker, it remains to be seen if the strategy would pay off.
Only investors willing to bet on the fund house under all circumstances and those not seeking anything significantly more than the Nifty 100 should allot small sums to the NFO. Others can wait out for the scheme to develop a track record before taking exposure, especially as there are established schemes with solid performance records available.
Published on January 24, 2026
