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Summary: Think small and mid caps are the only wealth creators? Think again. Over two decades of data tell a different story. Large caps don’t just cushion the blow when markets crash, they also deliver stronger profit growth than their peers in most cycles. That’s why mutual funds are quietly building positions here. Want to see which large caps are getting institutional traction? Check the story below.
If you’ve been tracking market performance over the last five years, you would know that small caps have been the decisive winners—with a spectacular 29 per cent annualised return. Mid caps, too, aren’t far behind at 25 per cent returns. Large caps, on the other hand, have lagged at 16 per cent—a decent return but still far less impressive than those of the smaller peers.
By this logic, large caps should hold less appeal. And investors should blindly pick mid and small caps over them. Not quite. Investing needs to consider risk and resilience as much as market performance
When markets turn brutal, large caps hold up better and bleed less than their smaller peers. Data backs this up. We analysed the BSE Largecap, Midcap and Smallcap indices, looking at every possible five-year investing period since 2005, using daily rolling returns. That means thousands of different five-year windows. Then we asked: What happened in the very worst of those stretches?
- In the worst 5 per cent of five-year periods, large caps still delivered around 2.7 per cent a year, while mid and small caps lost money.
- In the worst 1 per cent of periods, the truly brutal ones, large caps dipped only slightly compared with heavy losses in mid and small caps.
Large caps = downside protection
| Worst 5 per cent | Worst 1 per cent | |
|---|---|---|
| Largecap | 2.70% | -0.60% |
| Midcap | -1.60% | -4.40% |
| Smallcap | -5.20% | -7.80% |
| Annualised five-year returns on daily rolling basis since 2005 | ||
In simple words, even during the worst possible periods, large caps fared better. That’s the resilience you get with established, fundamentally-proven businesses, which could be often missing with mid and small caps.
That resilience shows up in earnings too. Across all five-year periods from 2015, large caps posted stronger profit growth than mid and small caps on a median basis. Only in the latest 2020–25 stretch did small caps leap ahead and that was a rebound powered by Covid pandemic. For the rest of the time, large caps were ahead, balancing growth with protection of capital.
Large cap earnings beat those of peers
| Category | 2020-25 (%) | 2019-24 (%) | 2018-23 (%) | 2017-22 (%) | 2016-21 (%) | 2015-20 (%) |
|---|---|---|---|---|---|---|
| Large caps | 13.5 | 12.8 | 9 | 10.9 | 9.1 | 8.2 |
| Mid caps | 11.5 | 12.3 | 9.6 | 8.6 | 7.5 | 7 |
| Small caps | 18.3 | 8.1 | 8.7 | 8.6 | 3.7 | 4.2 |
| 5Y annualised median profit after tax growth calculated on a five-year rolling basis | ||||||
In short: if you’re building wealth for the long haul, ignoring large caps could cost you dearly, especially when cycles turn unfriendly.
From resilience to selection
We’ve seen that large caps aren’t just steadier in drawdowns, they also hold their own on profit growth. The next question is obvious: how do you pick the strongest ones?
One proven approach can be to combine two lenses: quality metrics and institutional buying trends. Quality ensures you’re anchored in businesses that can endure cycles; fund flow data shows you where professional conviction is lining up.
Why look at what funds are buying
Mutual funds are worth tracking because they bring scale and research depth, access to management, expert calls and on-ground checks that few retail investors can replicate. Their buying can also influence liquidity, improve governance and sharpen price discovery. When serious money leans into a stock, it often signals genuine business progress.
But flows alone aren’t enough
Yet copying portfolios could be dangerous. Fund disclosures come with a lag and their trades are sometimes driven by liquidity needs, mandate rules or sector caps, not always fundamental factors. More importantly, institutions can spread risks across dozens of bets. Retail investors can’t.
That’s why we start with quality first. A rigorous screen tilts you toward businesses that generate cash, carry low debt and have consistently high returns on equity. Only after clearing this bar do we see where mutual funds have been adding positions.
The large-cap compass
For this exercise, we applied the following filters to the BSE Largecap universe:
- Median ROE >15 per cent
- Cumulative CFO/EBITDA >70 per cent over the last five years
- Current debt-to-equity <1
- Consistent free cash flow over the last five years
We then overlaid April–July 2025 mutual fund disclosures, focusing on the most actively bought names. The result: a shortlist of 10 large caps that combine durability with institutional backing—the kind of stocks that balance safety with opportunity.
High on quality and loved by mutual funds
| Company | 5Y revenue growth (%) | 5Y profit after tax growth (%) | 5Y ROE (%) | Stock Rating | Mutual fund holding addition* (%) |
|---|---|---|---|---|---|
| Infosys | 15 | 12 | 29.4 | 4 | 1.3 |
| ITC | 9 | 9 | 26.9 | 3 | 1.2 |
| CG Power and Industrial Solutions | 4 | 32 | 36.4 | 3 | 1.2 |
| Dabur India | 8 | 4 | 21 | 3 | 1.1 |
| Hero Motocorp | 4 | 5 | 20.8 | 5 | 1 |
| Alkem Laboratories | 12 | 23 | 19.9 | 4 | 0.9 |
| Torrent Pharmaceuticals | 8 | 34 | 21 | 4 | 0.9 |
| Tech Mahindra | 8 | 0 | 18.4 | 3 | 0.9 |
| Havells India | 17 | 13 | 18.4 | 3 | 0.7 |
| Britannia Industries | 10 | 14 | 51.2 | 4 | 0.5 |
| *From April to July 2025 | |||||
Below is a concise overview of the top three stocks from our shortlist:
ITC
Few Indian companies manage to balance legacy scale with reinvention as deftly as ITC. For decades, cigarettes have been the profit anchor, underwriting the balance sheet and enabling the company to diversify at a pace most peers cannot match. What makes ITC particularly interesting today is less about its heritage and more about the ecosystem it is building.
The hotel arm demerger in January 2025 was symbolic of this as it freed capital for faster-moving ventures. Its acquisitions in organics (24 Mantra), baby care (Mother Sparsh) and frozen foods (Prasuma, Meatigo) show how it is knitting category depth. Paperboards maintain leadership despite import and cost pressures.
Infosys
Infosys remains a scale-driven IT leader with deep exposure to the US and Europe. AI-led solutions (300 AI agents) now embedded in client workflows anchor its digital push, while “Project Maximus” and offshore strength sustain among industry’s best margins (three-year average of around 21 per cent). A cash chest of Rs 48,000 crore supports payouts and acquisitions. But deal wins fell to $11.6 billion in FY25, down sharply from the prior year, reflecting weak discretionary spend. Pricing pressure from Accenture, Capgemini and Indian peers looms large, leaving Infosys navigating a choppy global IT cycle.
CG Power and Industrial Solutions
Since joining Murugappa Group in 2020, CG Power has transformed from being debt-laden to debt-free. Its Rs 10,600 crore order book signals strong visibility across motors, transformers, switchgear and railways. Market share in low-tension motors (38 per cent) and expanded transformer capacity underpin core growth, while ventures in semiconductors (Axiro, OSAT JV with Renesas) show ambition beyond legacy. Margins of 12–13 per cent and parent backing add strength. Risks lie in executing its Rs 7,600 crore semiconductor capex and fending off commoditised competition.
Want to find tomorrow’s market leaders before everyone else?
At Value Research Stock Advisor, we do exactly what this story showed; go beyond headlines to uncover stocks that combine resilience, quality and long-term wealth-creating potential. Our recommendations are backed by rigorous research, tested frameworks, and the same discipline we’ve applied for decades.
Join Stock Advisor today and start building a portfolio that balances safety with opportunity.
Also read: The bright spot in China's fertiliser clampdown
This article was originally published on September 04, 2025.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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