Mutual Funds Based on Market Capitalization in India
Mutual Funds Based on Market Capitalization in India
May 10, 2023
5 Minutes
Unveiling the World of Mutual Funds Based on Market Capitalization
Introduction to Mutual Fund Market Capitalization
In the intricate landscape of mutual funds, one significant classification is based on market capitalization. Market cap, representing the total value of outstanding shares in the stock market, serves as a crucial parameter in this categorization.
Mutual Fund Categories in India
India's mutual funds are categorized into large-cap funds, mid-cap funds, small-cap funds, multi-cap funds, and Flexi-cap funds based on the market capitalization of their portfolio companies.
Large-Cap Equity Funds
Definition and Features:
Large-cap companies, constituting the top 100 in indices like BSE and NSE, boast significant market capitalization. SEBI guidelines mandate large-cap funds to invest a minimum of 80% in equity and equity-related instruments of large-cap companies.
Mid-Cap Equity Funds
Definition and Features:
Mid-cap companies, ranking 101st-250th in market capitalization, offer higher growth potential and increased risk. SEBI requires mid-cap funds to allocate at least 65% to mid-cap companies.
Small-Cap Equity Funds
Definition and Features:
Small-cap companies, starting from the 250th position in market capitalization, form the segment for small-cap funds. SEBI mandates a minimum of 65% investment in equity and equity-related instruments of small-cap companies.
Multi-Cap Equity Funds
Definition and Features:
Multi-cap funds diversify across large-cap, mid-cap, and small-cap companies, with a recent SEBI mandate requiring a minimum 25% allocation to each category. This move aimed to balance the bias towards large-cap stocks.
Flexi-Cap Equity Funds
Definition and Features:
Flexi-cap funds, similar to multi-cap funds, offer flexibility for fund managers to adjust exposure to mid and small-cap stocks. Unlike multi-cap funds, Flexi-cap funds have no restrictions on exposure to specific market cap categories.
Key Takeaways
Large-cap funds focus on the top 100 companies based on market capitalization.
Mid-cap funds target companies ranking 101st to 250th in market cap.
Small-cap funds concentrate on companies beyond the 251st position in market cap.
Multi-cap funds diversify across companies of all sizes, adhering to SEBI's recent allocation mandate.
Flexi-cap funds offer unparalleled flexibility in exposure to market cap categories.
Conclusion
Understanding the nuances, risks, and rewards associated with each mutual fund type is crucial for investors. Armed with this knowledge, investors can craft a diversified portfolio that aligns with their risk tolerance and financial goals.
Disclaimer: The views expressed in this article are those of Sundaram AMC and not Groww. The stocks mentioned are not recommendations, and investors should conduct their research and due diligence before investing.
Unveiling the World of Mutual Funds Based on Market Capitalization
Introduction to Mutual Fund Market Capitalization
In the intricate landscape of mutual funds, one significant classification is based on market capitalization. Market cap, representing the total value of outstanding shares in the stock market, serves as a crucial parameter in this categorization.
Mutual Fund Categories in India
India's mutual funds are categorized into large-cap funds, mid-cap funds, small-cap funds, multi-cap funds, and Flexi-cap funds based on the market capitalization of their portfolio companies.
Large-Cap Equity Funds
Definition and Features:
Large-cap companies, constituting the top 100 in indices like BSE and NSE, boast significant market capitalization. SEBI guidelines mandate large-cap funds to invest a minimum of 80% in equity and equity-related instruments of large-cap companies.
Mid-Cap Equity Funds
Definition and Features:
Mid-cap companies, ranking 101st-250th in market capitalization, offer higher growth potential and increased risk. SEBI requires mid-cap funds to allocate at least 65% to mid-cap companies.
Small-Cap Equity Funds
Definition and Features:
Small-cap companies, starting from the 250th position in market capitalization, form the segment for small-cap funds. SEBI mandates a minimum of 65% investment in equity and equity-related instruments of small-cap companies.
Multi-Cap Equity Funds
Definition and Features:
Multi-cap funds diversify across large-cap, mid-cap, and small-cap companies, with a recent SEBI mandate requiring a minimum 25% allocation to each category. This move aimed to balance the bias towards large-cap stocks.
Flexi-Cap Equity Funds
Definition and Features:
Flexi-cap funds, similar to multi-cap funds, offer flexibility for fund managers to adjust exposure to mid and small-cap stocks. Unlike multi-cap funds, Flexi-cap funds have no restrictions on exposure to specific market cap categories.
Key Takeaways
Large-cap funds focus on the top 100 companies based on market capitalization.
Mid-cap funds target companies ranking 101st to 250th in market cap.
Small-cap funds concentrate on companies beyond the 251st position in market cap.
Multi-cap funds diversify across companies of all sizes, adhering to SEBI's recent allocation mandate.
Flexi-cap funds offer unparalleled flexibility in exposure to market cap categories.
Conclusion
Understanding the nuances, risks, and rewards associated with each mutual fund type is crucial for investors. Armed with this knowledge, investors can craft a diversified portfolio that aligns with their risk tolerance and financial goals.
Disclaimer: The views expressed in this article are those of Sundaram AMC and not Groww. The stocks mentioned are not recommendations, and investors should conduct their research and due diligence before investing.
Author
Pluto Team
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