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Fund Types
SEBI categorisation explained — large-cap, mid-cap, hybrid, debt, fund-of-funds, gold ETFs.
SEBI's mutual fund categorisation, explained
Since October 2017 every Indian open-ended equity scheme must fit into one of SEBI's pre-defined buckets. The framework is the reason you see exactly one "Large Cap" fund per AMC, why "Multi Cap" and "Flexi Cap" are now two different things, and why some categories have hard market-cap constraints. Read this once and the fund-house websites become much easier to navigate.
Large Cap funds — top-100 stocks
Large Cap funds invest at least 80% of their assets in the top 100 listed Indian companies by market capitalisation (per the half-yearly AMFI list). They're the SEBI bucket designed for stable equity exposure.
Mid Cap funds
Mid Cap funds must hold at least 65% in stocks ranked 101-250 by market capitalisation. They occupy the middle of the risk-return spectrum: better upside than large-cap, more painful drawdowns, but compounding wealth steadily across cycles.
Small Cap funds
Small Cap funds must hold at least 65% in stocks ranked 251+ by market cap. They've delivered the strongest long-run returns of any equity category — paired with 50-60% drawdowns that most investors can't emotionally tolerate.
Multi Cap vs Flexi Cap — the November 2020 split, explained
Before November 2020 "Multi Cap" meant "any market cap mix the manager chooses". SEBI then re-defined Multi Cap to require at least 25% each in large/mid/small, and created a new "Flexi Cap" category for the old flexibility. Two different products today.
Index funds and ETFs — passive investing in India
Index funds and ETFs mirror an underlying index (Nifty 50, Nifty Next 50, Nifty Bank, etc.) with minimal management. Their cost advantage compounds dramatically over decades — and in the large-cap space, they've become the default core for many Indian portfolios.
Fund of Funds (FoF) — international, gold, debt
A FoF holds units of other mutual funds (often foreign ones) rather than direct equity or debt. They're the cleanest way for Indian investors to get exposure to overseas markets, gold, and certain debt strategies — but the tax treatment can surprise first-time buyers.
Hybrid funds — Aggressive, Conservative, Dynamic, Balanced Advantage
SEBI defines six hybrid categories. Aggressive (65-80% equity) and Conservative (10-25% equity) are the static blends. Dynamic Asset Allocation (Balanced Advantage) flexes between equity and debt based on a model. Each has distinct tax and behaviour profiles.
Debt fund categories — duration vs credit
SEBI defines 16 debt mutual fund categories. Most are organised by duration — the fund's sensitivity to interest-rate moves. A separate set is defined by credit quality and strategy: Corporate Bond, Banking & PSU, Credit Risk, Gilt, Dynamic Bond.
Sectoral and Thematic funds — concentration risk
Sectoral funds bet on one industry (banking, IT, pharma, FMCG). Thematic funds bet on a cross-sector idea (consumption, infrastructure, ESG). Both forsake diversification for conviction — a position that rewards correct calls and punishes wrong ones for years.