SEBI's mutual fund categorisation, explained

SEBI's October 2017 circular on Categorisation and Rationalisation of Mutual Fund Schemes reorganised every open-ended scheme in India into pre-defined buckets — five for equity, sixteen for debt, six for hybrid, plus solution-oriented and a handful of others. The framework matters because it dictates what an AMC's scheme is allowed to invest in, and it's the reason an AMC can offer exactly one "Large Cap" fund — not three.

The market-cap definition (the foundation)

Many equity buckets reference market-cap. SEBI defines these by rank, not absolute rupees:

• Large Cap: top 100 companies by full market capitalisation.
• Mid Cap: ranks 101–250.
• Small Cap: rank 251 and below.

AMFI publishes the ranked list every six months, and AMCs must rebalance to the new boundaries within one month of publication.

Equity categories

• Large Cap Fund — at least 80% in large-cap stocks.
• Large & Mid Cap Fund — at least 35% large-cap + at least 35% mid-cap.
• Mid Cap Fund — at least 65% in mid-cap stocks.
• Small Cap Fund — at least 65% in small-cap stocks.
• Multi Cap Fund — at least 25% each in large-, mid-, and small-cap (changed in November 2020).
• Flexi Cap Fund — at least 65% in equity, no market-cap constraint (the new bucket introduced in November 2020 to separate genuinely-flexible funds from constrained Multi Cap ones).
• ELSS — at least 80% in equity, 3-year lock-in, qualifies for Section 80C.
• Sectoral / Thematic / Focused / Value / Contra / Dividend Yield — each with its own at-least-x% rule.

One scheme per category per AMC

SEBI's core principle: every AMC may offer only one open-ended scheme per category (with a few exemptions for index funds and ETFs). This is why you won't find two Large Cap funds from the same AMC — fund houses that had multiple were forced to merge them during the 2018 rationalisation.

How to read a fund's name

A fund's SEBI category usually appears at the end of its name — "Large Cap Fund", "Flexi Cap Fund", "ELSS Tax Saver". On ProfitGuruOnline every fund's detail page shows the SEBI category at the top, and the category page (/mutual-funds → category) shows you every fund in that bucket ranked by historical returns.

Debt categories (the short version)

SEBI defines 16 debt buckets primarily by Macaulay duration (an interest-rate-sensitivity measure):

• Overnight — securities with a 1-day maturity.
• Liquid — up to 91-day maturity.
• Ultra Short / Low Duration / Money Market / Short Duration — increasing duration bands up to 3 years.
• Medium / Medium-to-Long / Long Duration — 3 to 7+ year ranges.
• And the credit / strategy categories: Corporate Bond, Banking & PSU, Credit Risk, Dynamic Bond, Gilt, Gilt-10Yr.

Why this matters when picking a fund

The category is a floor, not a ceiling. A Large Cap fund must hold ≥ 80% large-cap but can hold the rest in cash, debt, or smaller caps. Two funds in the same category can still have very different sector tilts, expense ratios and risk profiles — categorisation is the start of comparison, not the end.

Source

This article draws from the SEBI 2017 master circular and the AMFI categorisation note linked below.