Mutual Fund Categories Explained

SEBI defines exactly what each mutual fund category may invest in — that definition drives the fund's risk, its suitable holding period and who it fits. These guides explain every major category in plain English, with taxation, pros & cons and the questions investors actually ask.

• Large Cap Fund — Invests at least 80% in the top 100 stocks by market capitalisation (Nifty 100 / BSE 100 universe).
• Mid Cap Fund — Invests at least 65% in companies ranked 101st to 250th by market capitalisation.
• Small Cap Fund — Invests at least 65% in companies ranked 251st and below by market capitalisation.
• Flexi Cap Fund — Invests at least 65% in equities with no restriction on market cap distribution — can allocate freely between large, mid and small cap.
• Multi Cap Fund — Invests at least 75% in equities with a minimum of 25% each in large, mid and small cap stocks.
• ELSS — Equity Linked Savings Scheme — Equity fund with 80% minimum in equities, eligible for tax deduction under Section 80C. Mandatory 3-year lock-in.
• Index Fund — Passively managed fund that replicates a specific market index (Nifty 50, Nifty Next 50, etc.) with minimal active stock picking.
• Liquid Fund — Debt fund investing in money market instruments and debt with maturity up to 91 days.
• Balanced Advantage Fund (BAF) — Dynamically manages allocation between equity and debt based on market valuations — no fixed equity floor.

Once you know your category, shortlist funds in the screener or see the data-ranked best funds in it.