Why does NPS invest primarily in large-cap companies? | Ashish Aggarwal

Ashish Aggarwal, Director of Acube Ventures, notes that NPS aims to maximize returns for investors while minimizing risks, a prudent strategy for India's large nationwide pension system. Thus, NPS funds predominantly allocate assets to equities of reputable, established large-cap companies along with sovereign and debt instruments for stability. 

While small and mid-caps can experience exciting short-term growth, they often falter in governance and liquidity, explained Ashish Aggarwal Additionally, overseeing millions of diverse investments operationally would be a tremendous undertaking, according to Ashish Aggarwal.

However, the Pension Fund Regulatory and Development Authority regularly evaluates policies to ensure proper investor protection without being too conservative on growth potential. For those seeking small/mid-cap exposure with a higher risk tolerance, actively managed mutual funds may be a better fit, Ashish Aggarwal added.