Want to invest in a large-cap fund?

Diversified equity funds

HDFC Top 200 and Franklin India Bluechip are the two large-cap funds that have delivered good returns over a long period of time.

Besides the above two, there is another you can consider - DSPML Top 100 Equity. Though relatively new, it has done reasonably well since its launch in 2003.

Most of the other equity funds are blends. They may move across market capitalisation depending upon their outlook.

Apart from the above, you have index funds that invest only in the stocks of a particular index.

Tax-saving funds

Tax-planning funds generally are a little more aggressive because the lock-in ensures that redemption pressures will be relatively less. What this means is that since the investor cannot take out his money for three years at the minimum, the fund manager is sure that he has at least that much of money for that amount of time.

Hence, he may invest in the stocks of small companies which he believes will do well over a longer period of time.

In the category of ELSS funds, the only large-cap fund is the Franklin India Index Tax, which tracks S&P CNX Nifty Index, and hence invests only in the stocks of that index.

But do keep in mind that its returns will also be in close sync with the returns of the index, while most of the actively managed funds historically have out-performed the index funds.

Therefore, invest in it only if you would be content with returns close to that of the Nifty.

Apart from that, you would not find a single ELSS mandated to invest in large caps.

The closest you can get to a large-cap fund here is Franklin India Taxshield, which has maintained a large-cap dominated portfolio over the years. You can also consider UTI Equity Tax Savings Plan. It has also maintained its focus on large-cap stocks, though in the recent months it is turning more aggressive and investing substantially in smaller companies.

ELSS or diversified equity funds?

Your decision on how much to invest in ELSS or diversified equity funds must be based on two factors.

1. How much you need to save to avoid tax.
2. To what extent you are comfortable with the lock-in period of three years.

You can invest in ELSS funds the amount you need to, to avoid tax. Beyond that, you can go for diversified equity funds. However, if you want more liquidity, you can invest more in diversified equity funds.