After a solid bull-run in the last two calendar years, stock markets have taken a beating this year. Since the start of the year (till June 9, 2022), the BSE 100 index (which measures the returns of large-cap stocks) is down by about 5 per cent, but the BSE Mid Cap and BSE Small cap indices have bled much more at over 9 per cent and 12 per cent, respectively. Such a pattern is typical of almost every market fall, whereby the large-cap stocks show far greater resilience to the onslaught of the bears. And if you look at longer-term trends, this downside cushion doesn't take an awful lot away from their ability to build wealth. In the last 10 years, the BSE 100 index has delivered close to 13 per cent annualised returns while the mid-cap and small-cap indices have returned a shade over 14 per cent and 15 per cent respectively. These numbers reinforce why large caps should be the mainstay of any long-term growth portfolio. While you can garnish them with a touch of mid and small caps, it's perfectly okay if you don't want to, for their bumpier ride. Having said that, the performance of the large-cap funds this year will leave you with mixed feelings. While of course, they have done better than the smaller market segments, most actively managed ones have trailed the benchmark BSE 100. Only four out of 36 have managed to stay ahead of the index since the start of the year. This includes the focused as well as the diversified variants. That's because, within the universe of 100 large-cap stocks, there's a big divergence between the performance of the top 50 stocks and the next 50. To illustrate, Nifty 50 index is down around 5 per cent since the start of the year (as of June 9, 2022) while the Nifty Next 50 has fallen twice as much. Now while the Next 50 are under-represented in the Nifty 100 with just about 15 per cent weightage, actively managed funds invest more in them. On an average level across funds, their weightage in the Nifty 50 stocks is about 75 per cent with around 10-12 per cent each in Next 50 and the mid/small-cap stocks. These allocations have contributed to their poorer performance relative to the index this year. Flows driven by a handful of funds With the markets turning jittery, there appears to be a renewed investor interest in the large-cap funds. Both passives and actively managed funds have seen a sharp uptick in net inflows. But then again, these inflows have remained concentrated in a handful of top funds while most others are jostling for space in a crowded middle. This trend is most prominently playing out in case
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