Parag Parikh Large Cap Fund, an actively managed large cap fund benchmarked to the Nifty 100 TRI, is currently in its NFO period (19th -30th Jan 2026). We discuss whether investors should consider buying this fund.
The fund is marketed as a “passive plus” fund with a low expense ratio that tends to track the benchmark, except in special circumstances.
These were discussed in the last unit holder’s meeting. This is a brief summary of these “smart strategies”
- Single-stock futures at a discount: Using futures contracts when they trade below spot prices to gain more cost-effective market exposure.
- Index futures at a discount: Deploying index futures when available at discounts to spot prices, enabling cheaper market entry, especially during market turmoil
- Merger-related opportunities: When a company in an index is merging with another firm, buy the stock which is at a discount to the merger ratio.
- Smarter rebalancing: Gradually rebalancing when Nifty 100 composition changes are announced instead of executing trades mechanically on the actual index change dates, which can result in trades at better prices.
- Opportunities related to special situations like demergers: Unlike index funds, an active fund will not be forced to sell a demerged smaller unit of a company removed from the index on the demerger date. They can do so gradually.
- Covered call strategy: Selling call options at prices much higher than the current market price on stocks already owned. The cash received on sale is called premium income. If the call option price is exceeded, the stocks owned are sold for a capital gain. If not, nothing is done, and the premium income already obtained is the gain. The fund expects to help gain a small extra return with this strategy during sideways markets when most call options will expire worthless. See the scheme information document for an example.
Will all these gymnastics result in a perceptible/significant higher return (wrt Nifty 100 TRI), or will their benefits get washed away in market volatility “over the long term”? This remains to be seen. I have my reservations, but I will be glad to change my mind if there is a large enough data set (5+ years).
For this reason alone, I do not see any compelling reason to invest in this fund. What is more important is that the interested reader should ask
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- Is there a place for a large cap fund in my portfolio? For most active and passive fund investors, the answer will be no. So buying the Parag Parikh Large Cap Fund will only result in clutter.
- For the very few existing investors who were gung-ho on mid and small cap funds and have now realised how volatile they can be, Parag Parikh Large Cap Fund can be an option, but a Nifty 50, Nifty 100, or even Nifty 500 index fund would be a simpler option.
- For the newbie investor who has a FOMO about choosing only passive funds, Parag Parikh Large Cap Fund can be an option, provided they have the right expectations (meaning do not expect too much outperformance)
- “I already hold their flexicap fund. Should I direct new investments in this NFO?” I do not see any clear benefit in doing this. Will this large cap fund outdo the flexicap fund? No one knows.
In November, when we wrote – Parag Parikh Large Cap Fund -a curious choice, some readers speculated that this fund would be part of their gift city offering for NRIs (inbound fund), along with their flexicap. This has turned out to be true. Was this the main motive for launching the large cap fund? I have no clue. But I do expect a good chunk of the large cap fund’s AUM from Gift City investments over time.
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