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Is Investing in Both HDFC Top 100 and Nippon Large Cap a Redundancy?

Ramalingam

Ramalingam Kalirajan  |9823 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 20, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Piyuah Question by Piyuah on Oct 30, 2024Hindi
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Hello, I have 2 MF's namely HDFC Top 100 Large Cap and Nippon Large Cap. One of my friends suggested that both of them are the same and that Nippon is better. He suggested that I opt out of HDFC and instead invest in small cap like Quant etc. please advice

Ans: Investing in two large-cap funds can lead to redundancy. Both funds may have overlapping stocks. Diversifying into different categories can enhance returns. Here’s a detailed assessment:

Large-Cap Funds: Key Considerations
Portfolio Overlap
Large-cap funds often invest in similar top companies. This reduces diversification.

Performance Consistency
Large-cap funds offer stability but may lag in delivering high returns.

Expense Ratio Impact
A higher expense ratio can lower your long-term returns.

Tax Efficiency
Capital gains on equity funds above Rs. 1.25 lakh are taxed at 12.5%.

Insights on HDFC Top 100 and Nippon Large-Cap
HDFC Top 100
This fund focuses on established blue-chip companies. It provides stable, long-term growth.

Nippon Large-Cap
This fund also invests in top market leaders. It may have a slightly aggressive approach.

Comparative Analysis
Both funds aim for similar objectives, leading to potential redundancy. Choosing one is more effective.

Why Diversify Beyond Large-Cap Funds?
Small-Cap Funds
These offer higher growth potential but come with higher risk.

Flexi-Cap Funds
These provide flexibility to invest across large, mid, and small-cap stocks.

Sectoral Funds
These are ideal for those confident in specific industry performance.

Should You Switch From HDFC to Small-Cap?
Switching depends on your goals and risk appetite:

For Moderate Risk
Retain one large-cap fund and invest in a flexi-cap fund.

For High Growth
Consider allocating funds to small-cap or mid-cap funds.

Importance of Avoiding Direct Funds
Professional Monitoring
Certified Financial Planners actively manage regular plans.

Cost-Benefit Analysis
Direct funds save on commissions but need regular tracking by you.

Guidance Benefits
Regular plans provide guidance and periodic reviews, optimising your portfolio.

Actionable Recommendations
Retain only one large-cap fund. Choose based on lower expense ratio and consistent performance.

Diversify into small-cap or flexi-cap funds for higher growth potential.

Align your investments with your risk profile and financial goals.

Avoid relying solely on direct funds. Seek advice from a Certified Financial Planner.

Final Insights
Balancing large-cap stability with small-cap growth can maximise returns. Select one large-cap fund and diversify wisely. Consult a Certified Financial Planner for tailored advice.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Mutual Funds, Financial Planning Expert - Answered on Mar 06, 2025

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I am currently investing 28000/- in following mf . Kindly suggest me whether i am investing in right MF or not. Suggest if to be switched in to which MF HDFC LARGE AND MID CAP FUND - REGULAR PLAN - GROWTH SIP Amount 5000 HDFC NIPPON INDIA SMALL CAP FUND - GROWTH PLAN - GROWTH OPTION SIP Amount 5000 HDFC LARGE CAP FUND - REGULAR PLAN - GROWTH SIP Amount 3000 HDFC FOCUSED 30 FUND - REGULAR PLAN - GROWTH SIP Amount 3000 NIPPON INDIA POWER AND INFRA FUND- GROWTH PLAN-GROWTH OPTION SIP Amount 3000 HDFC MID-CAP OPPORTUNITIES FUND - GROWTH OPTION SIP Amount 3000 ICICI PRUDENTIAL INFRASTRUCTURE FUND - GROWTH SIP Amount 3000 INVESCO INDIA INFRASTRUCTURE FUND - GROWTH SIP Amount 3000
Ans: Your portfolio consists of multiple actively managed funds across different categories. While it has a good mix of large-cap, mid-cap, and small-cap funds, there are areas where adjustments can improve diversification and risk management.

Strengths of Your Portfolio
Your long-term investment horizon of 10 years allows for compounding and wealth creation.

You have exposure to different market caps, which provides a balance of stability and growth.

Actively managed funds can generate higher returns compared to passive funds.

Concerns in Your Portfolio
You are holding too many funds, leading to unnecessary duplication. More funds do not always mean better diversification.

Your portfolio has excessive allocation to sectoral funds, which increases concentration risk. If the sector underperforms, your returns will be affected.

Some funds have overlapping holdings, reducing the overall diversification benefit.

You have multiple funds from the same asset management company, limiting exposure to different investment styles.

Recommended Portfolio Adjustments
Retain a well-performing large & mid-cap fund instead of holding multiple funds in this category.

Maintain exposure to small-cap or mid-cap funds but avoid holding multiple funds with similar strategies.

A single focused fund is sufficient. Too many concentrated portfolios increase risk without adding significant benefits.

Reduce exposure to sector-specific funds. While sectoral funds can deliver high returns, they carry higher volatility and depend heavily on the sector’s performance. A more diversified approach is recommended.

Instead of multiple funds in the same category, consolidate into a few high-quality diversified equity funds that provide stable long-term growth.

Include a flexi-cap fund to enhance diversification and give fund managers the flexibility to invest across market capitalizations.

Final Insights
Your investment approach is well-structured, but simplifying your portfolio will improve returns and make it easier to manage.

Reducing sectoral allocation and consolidating overlapping funds will improve efficiency and stability.

A diversified and well-balanced portfolio with a mix of large-cap, mid-cap, small-cap, and flexi-cap funds will ensure long-term growth with controlled risk.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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Janak

Janak Patel  |62 Answers  |Ask -

MF, PF Expert - Answered on Mar 06, 2025

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I am currently investing 28000/- in following mf . Kindly suggest me whether i am investing in right MF or not. Suggest if to be switched in to which MF HDFC LARGE AND MID CAP FUND - REGULAR PLAN - GROWTH SIP Amount 5000 HDFC NIPPON INDIA SMALL CAP FUND - GROWTH PLAN - GROWTH OPTION SIP Amount 5000 HDFC LARGE CAP FUND - REGULAR PLAN - GROWTH SIP Amount 3000 HDFC FOCUSED 30 FUND - REGULAR PLAN - GROWTH SIP Amount 3000 NIPPON INDIA POWER AND INFRA FUND- GROWTH PLAN-GROWTH OPTION SIP Amount 3000 HDFC MID-CAP OPPORTUNITIES FUND - GROWTH OPTION SIP Amount 3000 ICICI PRUDENTIAL INFRASTRUCTURE FUND - GROWTH SIP Amount 3000 INVESCO INDIA INFRASTRUCTURE FUND - GROWTH SIP Amount 3000
Ans: Hi Sandeep,

You have mentioned a total of 8 MF schemes for your investment of 28000 per month.
As details regarding your goal and requirement is not available, it is difficult to judge the overall portfolio from that point of view.
The schemes mentioned though are different names but will have a lot of overlap especially when you consider large cap stocks in their portfolio - HDFC Large & Mid / HDFC Large / HFDC Focused 30 and even the 3 Infra funds.

I believe the idea was to diversify your portfolio thru multiple schemes and if so, that is not really achieved.

Assuming you want to invest for over 10 year period, I suggest you keep your portfolio relatively simple with 4-5 schemes - 1 large cap (6000 in HDFC Large is ok), 1 Mid cap (6000 in HDFC Mid-cap or Motilal Oswal Midcap), 1 Small Cap (6000 in Nippon Small cap is ok) and 1 Infra (as you have shown inclination to Infra, 4000 in ICICI Pru Infra is ok) and add 1 Flexicap (6000 in Parag Parikh Flexicap which also has some overseas exposure). This will provide good diversification and less overlap.

This will provide good diversification and asset allocation across market caps.

Thanks & Regards
Janak Patel
Certified Financial Planner.

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Ramalingam

Ramalingam Kalirajan  |9823 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Apr 03, 2025

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I am currently investing 28000/- in following mf . Kindly suggest me whether i am investing in right MF or not. Suggest if to be switched in to which MF HDFC LARGE AND MID CAP FUND - REGULAR PLAN - GROWTH SIP Amount 5000 HDFC NIPPON INDIA SMALL CAP FUND - GROWTH PLAN - GROWTH OPTION SIP Amount 5000 HDFC LARGE CAP FUND - REGULAR PLAN - GROWTH SIP Amount 3000 HDFC FOCUSED 30 FUND - REGULAR PLAN - GROWTH SIP Amount 3000 HDFC MID-CAP OPPORTUNITIES FUND - GROWTH OPTION SIP Amount 3000 ICICI PRUDENTIAL INFRASTRUCTURE FUND - GROWTH SIP Amount 3000 HDFC FLEXIVAP FUND - GROWTH SIP Amount 4000 CONTRA FUND =4000 PLEASE REVIEW
Ans: Your investment approach shows a good mix of large, mid, and small-cap funds. However, there are areas where adjustments can improve risk management and returns.

Review of Existing Portfolio
Large Cap Exposure (Rs 3,000/month)

Large-cap funds offer stability.

The allocation here is low compared to mid and small caps.

A slight increase may help balance volatility.

Large & Mid Cap Exposure (Rs 5,000/month)

This fund gives exposure to both stable and growth-oriented stocks.

Keeping this allocation is fine.

Mid Cap Exposure (Rs 3,000/month)

Mid-cap funds can give high returns but are volatile.

Exposure is reasonable but should not be increased further.

Small Cap Exposure (Rs 5,000/month)

Small caps have high growth potential but also high risk.

Reducing this allocation slightly may help manage risk.

Focused Fund (Rs 3,000/month)

These funds hold fewer stocks, increasing concentration risk.

If risk appetite is low, consider switching to a more diversified fund.

Infrastructure Fund (Rs 3,000/month)

Thematic funds like this are sector-specific.

These are cyclical and may not perform consistently.

If diversification is a priority, this can be switched to a multi-sector fund.

Flexi Cap Exposure (Rs 4,000/month)

Flexi-cap funds offer flexibility across market caps.

This is a good choice and can be continued.

Contra Fund (Rs 4,000/month)

Contra funds follow a contrarian strategy, buying undervalued stocks.

These are good for long-term investing.

Keeping this allocation is fine.

Suggested Adjustments
Reduce small-cap allocation to Rs 3,000/month.

Increase large-cap allocation to Rs 5,000/month.

Consider switching out of the infrastructure fund to a more diversified fund.

If risk appetite is moderate, shift from focused fund to a flexi-cap or large & mid-cap fund.

These changes will improve diversification, reduce risk, and maintain growth potential.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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