Equity funds, by size and style
The SEBI equity categories
Equity funds carry a hundred marketing names, but SEBI sorts them into fixed categories, and the exam expects the exact definitions, not vibes. The first axis is company size, and the clever part is that size is not a matter of opinion: it is set by rank on the AMFI list. Large cap is the top 100 companies by full market value, mid cap the 101st to 250th, and small cap the 251st onwards. From that come the size funds: a Large Cap fund keeps at least 80% in large caps, while Mid Cap and Small Cap funds keep at least 65% in theirs.
The second axis is style, how wide the net is cast. A Multi Cap fund must hold at least 75% in equity with a floor of 25% each in large, mid and small caps, so it is always exposed to small caps. Its cousin the Flexi Cap fund keeps at least 65% in equity but can roam freely across sizes, a subtle but favourite exam contrast. A Large & Mid Cap fund splits the difference (at least 35% each in large and mid). At the concentrated end sit the Focused fund (a maximum of 30 stocks) and the Sectoral/Thematic fund (at least 80% in one sector or theme), both riskier because they give up diversification.
Two special shapes complete the picture. ELSS is an equity fund with at least 80% in equity, a 3-year lock-in, and a Section 80C deduction, the tax-saver of the family. And index funds and ETFs are passive: instead of trying to beat a benchmark, they simply track it at low cost. Anchor on size, then style, then the two specials, and every equity label the market throws at you will slot neatly into place.
- 1
Company size is fixed by rank on the AMFI list, large cap is the top 100 companies by full market value, mid cap the 101st to 250th, and small cap the 251st onwards.
- 2
A Large Cap fund holds at least 80% in large caps; a Mid Cap fund at least 65% in mid caps; a Small Cap fund at least 65% in small caps.
- 3
A Multi Cap fund holds at least 75% in equity, with a minimum of 25% each in large, mid and small caps.
- 4
A Flexi Cap fund holds at least 65% in equity but can move freely across all sizes.
- 5
A Large & Mid Cap fund holds at least 35% in large caps and at least 35% in mid caps.
- 6
A Focused fund holds a maximum of 30 stocks; a Sectoral or Thematic fund puts at least 80% into one sector or theme, so it is concentrated and riskier.
- 7
ELSS holds at least 80% in equity, carries a 3-year lock-in, and qualifies for a Section 80C deduction.
- 8
An index fund or ETF is passive, it tracks an index at low cost rather than trying to beat it.
Two funds both look 'diversified'. One is Flexi Cap (goes anywhere across sizes); the other is Multi Cap (must keep at least 25% each in large, mid and small). The Multi Cap is forced to hold small caps even in a shaky market, so it can swing more, a distinction the exam loves.
Practice
🔥 0 streakReal exam format. Answer by voice, tap, or press 1 to 4. No negative marking, so always attempt.
By SEBI's definition, large-cap companies are:
A Multi Cap fund must hold a minimum of:
A Focused equity fund can hold a maximum of:
Which fund carries a compulsory lock-in and a Section 80C tax benefit?
A Sectoral or Thematic fund is riskier than a diversified equity fund mainly because it:
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Education for the exam, not financial advice. Answers can be wrong, so confirm figures against the workbook.