Pros & Cons of Investing in Motilal Oswal Large & Mid Cap Fund

Launched in October 2019, Motilal Oswal Large & Mid Cap Fund is an open-equity scheme that primarily invests in companies in the largecap and midcap segment of the Indian equity market.

The fund follows a bottom-up approach to stock picking to identify and invest in high-quality businesses having sustainable and scalable business models across sectors.

The investing strategy followed by the fund has enabled it to outperform its benchmark, the Nifty LargeMidcap 250 - TRI, and many of its peers in recent years.

This has drawn the attention of investors which has resulted in the fund's assets growing to nearly Rs 92 billion (bn).

How Does This Fund Invest Your Money?

The fund invests 35% to 65% of its total assets in large & midcaps and around 30% in other stocks, including international stocks.

Other than that, the fund may also invest up to 10% of its total assets in real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).

For defensive purposes, the fund has a mandate to allocate up to 30% of its total assets in units of liquid/ debt schemes, debt & money market instruments, government securities, G-secs, and cash & cash equivalents.

As per the April 2025 portfolio, Motilal Oswal Large & Mid Cap Fund is holding 97.9% of its assets in domestic equities, 0.5% in derivative futures for hedging purposes, 1.5% in cash & cash equivalents and the remaining is in an Alternate Investment Fund (AIF).

The fund holds around 74% in large & midcap stocks. Smallcaps are around 23% of the portfolio and around 4% are in others (which includes derivative futures and cash equivalents).

Currently, the top holdings of the fund are Eternal Ltd. (Zomato), Trent, and Bharat Dynamics, among others. A total of 31 stocks are held in the portfolio across nine sectors.

The top 3 sectors it has invested in are capital goods (33.6%), finance (14.5%), and retail (13.3%).

Should investors consider this fund now?

In this editorial, we will discuss the pros and cons of investing in Motilal Oswal Large & Mid Cap Fund.

Read on...

Pros

#1 Solid Performance

Motilal Oswal Large & Mid Cap Fund has shown superior performance over the last couple of years.

It has delivered remarkable rolling returns of 40.7% and 26.6% in the last 1-year and 3-year period, respectively.

Over a longer period of 5 years, the fund is also one of the top performers in the category.

The performance is also decent across bull and bear market phases. After underperforming during the 2020 market crash, it established itself as a strong player in the following market rally.

The sensible strategy employed to manage the portfolio has worked well in favour of the fund.

#2 Robust Risk-Adjusted Returns

Motilal Oswal Large & Mid Cap Fund's risk-adjusted returns - denoted by the Sharpe ratio (0.38) and Sortino ratio (0.66) - are noticeably better than the benchmark index and among the best in the large & mid cap fund category.

In other words, the fund has justified the risk taken.

Motilal Oswal Large & Midcap Fund - Performance Snapshot

Scheme Name	Absolute (%)	CAGR (%)		Risk Ratios
	1 Yr	3 Yr	5 Yr	SD Annualised	Sharpe	Sortino
Motilal Oswal Large & Midcap Fund	40.72	26.60	28.09	18.44	0.38	0.66
Category Average	27.31	19.71	23.79	14.82	0.28	0.58
Nifty 50 - TRI	25.71	19.12	24.08	14.39	0.30	0.64

Source: ACE MF

Cons

#1 High-Risk Contender

To achieve appealing returns, Motilal Oswal Large & Mid Cap Fund has exposed its investors to relatively high risk.

Risk, as measured by the standard deviation, is much higher than some of its peers, the overall category average as well as NIFTY LargeMidcap 250 - TRI.

This is mainly because of the fund's slightly higher allocation to midcap stocks than largecaps currently. It also holds a higher allocation to smallcaps compared to its category peers.

Moreover, the fund holds relatively few high dividend yield stocks because it pursues a growth style of investing to achieve its investment objective.

#2 Portfolio Concentration Risk

Motilal Oswal Large & Mid Cap Fund holds a high conviction portfolio of 30 stocks across 9 sectors. This is a concentrated investing strategy when compared to the portfolio of some of its category peers that have over 50 to 200 stocks across a variety of sectors.

Conclusion

Motilal Oswal Large & Mid Cap Fund has established itself as a high-performing fund in the Large & Midcap category.

But the risk taken by the fund to achieve the returns is also high.

The fund's strategic focus on high-growth large and mid-cap stocks, along with smallcaps using the QGLP (Quality, Growth, Longevity & Price) framework has been instrumental in its recent success.

However, it is important to remember that past performance is not a guarantee of future results.

Looking ahead, the large and midcap space is well-positioned to capitalise on India's economic growth drivers.

Large-cap companies are expected to continue delivering stable performance backed by strong financial resources and leadership.

They are well-positioned to navigate global uncertainties such as geopolitical tensions. During volatile market conditions, these stocks would attract the attention of both institutional and non-institutional investors.

For midcap stocks, the outlook is promising given their high growth potential. However, due to expensive valuations of certain midcaps, the short-term downside risk cannot be ignored.

The fund is suitable for investors with a high-risk appetite aiming for long-term growth and having an investment time horizon of at least 5-7 years.

Exercise prudence when selecting mutual fund schemes for your portfolio.

Be a thoughtful investor.

Happy Investing.

# Table Note: Data as of 2 June 2025
Rolling period returns are calculated using the Direct Plan-Growth option. Returns over 1-year are compounded annualised.
Please note, that returns here are historical returns.
Risk ratios are calculated over a 3-year period assuming a risk-free rate of 6% p.a.
Past performance is not an indicator of future returns.
The list of schemes is not exhaustive.
The securities quoted are for illustration only and are not recommendatory.
Speak to your investment advisor for further assistance before investing.

Disclaimer: Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
This article is for information purposes only. It is not a recommendation and should not be treated as such.