Parag Parikh Large Cap Fund NFO Opens: A Worthy Addition to Your Portfolio?

Parag Parikh Mutual Fund has come up with an equity new fund offer (NFO) after a gap of 5 years, this time, a large cap fund.

Parag Parikh Large Cap Fund will be the third equity scheme from the fund house (and seventh overall) after the flagship Parag Parikh Flexi Cap Fund and the Parag Parikh ELSS Tax Saver Fund.

Unlike many of its peers who have been aggressively launching NFOs, Parag Parikh Mutual Fund follows a measured approach to introducing new schemes and is willing to launch them only under specific conditions.

Thus, the new launch has generated excitement among investors as to what unique proposition the fund house has come up with.

In this editorial, find out everything you need to know about Parag Parikh Large Cap Fund NFO, what sets it apart, and whether it is suitable for your investment needs.

Parag Parikh Large Cap Fund NFO details

Parag Parikh Large Cap Fund will invest predominantly in India's top large-cap companies by utilising a low active share and a cost-conscious investment approach.

Source: PPFAS

The fund will aim to deliver index-like returns by closely aligning its portfolio to the Nifty 100 index. However, it is not to be construed as an index fund as it will take active calls under the following circumstances:

• When the constituents of the Nifty 100 index change, the rebalancing will be done in phases to seek better prices
• It will use stock and index futures if they are available at a discount
• It will seek to capitalise on events such as mergers which may result in valuation gaps
• It will maintain a small opportunistic share (under 10%) to capitalise on special situations, demergers, and other corporate actions

How Parag Parikh Large Cap Fund differentiates its portfolio?

What sets Parag Parikh Large Cap Fund apart is that the fund apart will not actively buy and sell stocks based on valuations and fundamentals.

Instead, it will aim to mirror the Nifty 100 - TRI's performance, resulting in better transparency and predictability.

The index-oriented approach will result in low expense ratio and low turnover ratio compared to typical actively-managed funds in the category.

Moreover, the performance of the fund will not deviate significantly from the underlying index.

Is Parag Parikh Large Cap Fund suitable for your portfolio?

Parag Parikh Large Cap Fund is suitable for investors aiming to benefit from the growth potential of leading 100 companies by market capitalisation at a relatively lower cost and have an investment horizon of at least 3-5 years.

As its portfolio will be closely aligned to the index, it may not be suitable for investors aiming to significantly outperform the index.

When investing in any NFO ensure that the fund's investment philosophy aligns with your personal goals, investment horizon, and risk appetite.

While Parag Parikh Mutual Fund has earned respect for its prudent investment strategies and efficient risk management, investment decisions should only be driven by carefully evaluating the rationale for including it in your existing portfolio and the incremental value it offers.

Is it worth adding this NFOs to your mutual fund portfolio?

The track record of performance and risk-reward matrix are important criteria to select the best mutual fund schemes.

But since NFOs do not have a proven track record, it can become difficult for any investor to compare and pick the right scheme within a particular category.

This makes investing in new fund offers a risky proposition.

That said, if you are willing to take the risk, you may consider adding NFOs to your portfolio provided it offers a unique proposition that is currently not available in the market and also if it can aid in the diversification of your portfolio.

The scheme should be suitable for your risk appetite and investment horizon and must enable you to realise your set financial goals.

Disclaimer: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, enlistment as IA with Exchange and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.