Exploring Mutual Funds by Market Capitalization

Introduction to Market Cap in Mutual Funds

The realm of mutual funds presents a key classification based on market capitalization. Market cap, which denotes the total value of a company's shares in the stock market, is a critical metric in this categorization.

Categories of Mutual Funds in India

In India, mutual funds are categorized into large-cap funds, mid-cap funds, small-cap funds, multi-cap funds, and flexi-cap funds according to the market capitalization of the companies they include in their portfolios.

Large-Cap Equity Funds

Definition and Features: Large-cap funds invest in the top 100 companies by market capitalization, as listed on indices like BSE and NSE. According to SEBI guidelines, these funds must invest at least 80% in large-cap companies.

Mid-Cap Equity Funds

Definition and Features: Mid-cap funds focus on companies ranked from 101st to 250th in terms of market capitalization. Offering potential growth and risk, SEBI mandates these funds to allocate a minimum of 65% to mid-cap stocks.

Small-Cap Equity Funds

Definition and Features: Small-cap funds target companies that are ranked 251st and below in market capitalization. SEBI requires a minimum of 65% investment in such companies.

Multi-Cap Equity Funds

Definition and Features: Multi-cap funds invest across large, mid, and small-cap companies, with a SEBI requirement of at least 25% allocation to each category, aiming to balance large-cap stock bias.

Flexi-Cap Equity Funds

Definition and Features: Flexi-cap funds give fund managers the liberty to adjust stock exposure without constraints on specific market cap categories, unlike multi-cap funds.

Key Insights

• Large-cap funds concentrate on the top 100 largest companies by market value.
• Mid-cap funds invest in companies ranked 101st to 250th.
• Small-cap funds aim at companies beyond the 251st position.
• Multi-cap funds spread their investments across all sizes, adhering to SEBI's allocation rules.
• Flexi-cap funds provide flexibility in market cap exposure.

Conclusion

For investors, understanding each mutual fund type's nuances, risks, and potential rewards is essential. Using this knowledge, investors can build a diversified portfolio aligned with their risk profiles and financial objectives.

Disclaimer: The opinions stated are those of Sundaram AMC and not Groww. The mentioned stocks are not recommendations. Investors should undertake their research before investing.