Large Cap Stocks

What are Large Cap Stocks?

Market capitalization is the total value of all of a company’s shares of stock and is calculated by multiplying the number of stock shares outstanding by the current share price. Large-cap stocks are the respective shares of the biggest companies that comprise a market capitalization of ₹ 20,000 Crore or more. As per SEBI, the listed companies which are ranked from 1st to 100th company in the Indian stock exchanges (NSE & BSE) in the terms of market capitalization are said to be Large Cap Stocks. Reliance, TCS, HDFC Bank are some of the large-cap companies in India. Nifty 50 hosts the top fifty large-cap stocks in India which are traded in the market. Some large-cap stocks are also called bluechip stocks as most of the time the companies which hold these bluechip stocks are market leaders in their respective sectors or industry. These companies generally have wide market recognition, productivity and are financially stable. There are in total 119 Bluechip Companies in India. Reliance Industries Ltd. (RIL) is the largest company in terms of Market Capitalisation(₹1,592,129.02 Cr).

What are the Features of Large-Cap Stocks?

Some key features of Large-Cap stocks are:

Low-risk: Large-cap companies are financially stable therefore they have a very low impact when it comes to market volatility. This lowers the risk on such investments, solely because they are independent of risks of dissolution in situations like a market contraction and correction. Moreover, even in such situations, they are able to operate their business despite such occurrences.

Moderate returns: Large-cap companies are well established and are financially stable. Therefore, there are lower chances of the share values getting appreciated. Returns on large-cap stocks are mostly based on their dividends.

Rich history: Large-cap companies have been in markets for a long time and thus have comprehensive experience. They have seen various cycles and ups and downs in the market and they have the potential to go through all the phases of market cycles.

Liquid: Large caps are one of the highest liquid investment options due to their extensive popularity and easily available investors.

Expensive: Most large-cap stocks are expensive compared to other investment options.

What are the Benefits of Investing in Large-Cap Stocks?

Some of the reasons why you should invest in large-cap stocks:

Optimal stability: Large-cap shares give stability to the investment portfolio. There’s a very least possibility of a large-cap company being declared as inoperative under a prime market crisis. Thus, it can handle the losses that you might suffer to a great extent through additional securities in your portfolio in a situation of a market slump.

A systematic flow of income: The key source of income that large-cap stocks are the dividends. Thus, while it may not bring substantial capital gains on transfer or sale of the same, you will be likely to get regular dividends. This element can thus balance the lack of regular returns that you might receive from other sorts of securities.

Accessibility of Information: Large-cap companies are obligated to publish their important reports and statements in public like annual reports, etc. The operations and profitability offer a rather extensive viewpoint of the efficiency in a large-cap stocks list. This type of information is pivotal when it comes to sound investment conduct. Thus, we can easily analyze this information against your portfolio for understanding what suits it best.

What are the Drawbacks of Large-Cap Stocks?

The drawbacks of Large-cap stocks are:

Low capital appreciation: Due to the mild response to market fluctuations and volatility, large-cap stocks doesn’t appreciate well compared to small and mid-cap stocks.

Expensive: Most large-cap stocks are highly-priced compared to other investment options because of which the investors with low funds are unable to invest in large-cap funds.

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