Multi Cap Mutual Funds

The 25% rule means a multi cap fund must put at least a quarter of its money into large, mid and small companies each. There is a second layer. At least 75% of the fund must be in equity, which means shares of companies.

A mutual fund is a pool of money from many people, invested by a professional manager under SEBI rules. SEBI, the market regulator, gives every fund a category: its label for what the fund may hold. The multi cap label has carried the 25% rule since SEBI's circular of 11 September 2020. Today it sits in the framework in force since 26 February 2026, gathered in the Master Circular of 20 March 2026.

Size here means market capitalisation, or market cap. That is a company's share price times its number of shares. AMFI, the mutual fund industry body, ranks every listed company by it. Ranks 1 to 100 are large cap. Ranks 101 to 250 are mid cap. Rank 251 onwards is small cap.

Now put it in rupees. Of every ₹1,00,000 in the fund, at least:

• ₹25,000 must sit in companies ranked 1 to 100
• ₹25,000 must sit in companies ranked 101 to 250
• ₹25,000 must sit in companies ranked 251 or lower

Those three floors add up to ₹75,000, the equity minimum. The last ₹25,000 is the manager's call. It can buy more shares of any size. It can also go into money market instruments (short-term lending), gold and silver instruments or InvITs (infrastructure investment trusts), each within its own limit.

So at least ₹50,000 of every ₹1,00,000 sits outside the 100 biggest companies.

On AMFI's list for the six months ended 30 June 2026, GAIL (India) was the last large cap, at rank 100. Navin Fluorine International, rank 251, was the first small cap. It averaged ₹33,442 crore in full market cap.

AMFI updates this list every six months. Funds must then rebalance within one month, buying and selling to bring the mix back inside the rules.

SEBI's formula scores mid and small cap shares high, and a multi cap fund must hold at least half in them. The riskometer is the risk label SEBI makes every fund show. It runs on six levels from Low to Very High, and is checked every month.

Nearly every listed multi cap fund read Very High on 29 September 2026.

The formula gives each share three scores:

• Size: 5 for large cap, 7 for mid cap, 9 for small cap
• Price swings: 5 or 6, based on daily moves over two years
• Impact cost, the extra price paid to trade a share: 5, 7 or 9

A share's score is the simple average of the three. A fund's overall score above 5 reads Very High. A multi cap fund must keep at least 25% at a size score of 9 and 25% at 7. That pushes its score above 5.

Shares of every size have fallen hard before. An index is a list of companies picked by fixed rules, whose combined value is tracked every day. Index data from NSE Indices shows these falls, each over its own dates:

• The NIFTY Smallcap 250 fell 73.2% from 2 January to 2 December 2008.
• The NIFTY Midcap 150 fell 44.2% from 8 January 2018 to 23 March 2020.
• The NIFTY 50 fell 59.9% from 8 January to 27 October 2008.

These are price figures. They leave out dividends, the cash companies pay shareholders from profits.

Suppose ₹25,000 of ₹1,00,000 in the fund sits in small caps. Assume that slice fell as far as the NIFTY Smallcap 250 did in 2008. It would be worth about ₹6,700. This is an assumption, not a forecast. A fund's small caps are not the index.

They suit money that can stay invested for 7 years or more. That horizon is Koshex's suggestion, not a SEBI rule.

They also suit someone who wants all three company sizes held by rule, inside one fund. The manager cannot choose to hold less than 25% in small caps, or in mid caps.

They do not suit money you will need soon, such as college fees due next June.

There is no lock-in, a period during which you cannot sell at all. By rule, the fund must pay you within 3 working days of a sale. Each scheme sets its own exit load, a fee some funds charge if you sell within a set time after buying. Its scheme page shows the terms.

Koshex sells the regular plan, the version of a fund bought through a distributor. A distributor is a registered intermediary that helps you buy and manage funds; Koshex holds AMFI registration ARN-154632. When markets fall sharply, Koshex talks you through it before you sell.

A multi cap fund is taxed at equity rates only if it keeps at least 65% in shares of Indian listed companies. The test is in section 198(8) of the Income-tax Act, 2025, in force from 1 April 2026. It is measured as a yearly average of monthly figures. It is a separate test from SEBI's 75% rule.

The table can include a fund of funds, which invests in other mutual funds. It gets equity rates only through a stricter route. At least 90% must go into units of another listed fund. That fund must itself hold at least 90% in Indian listed shares.

Your holding period decides the rate. That is how long you have owned a unit, from the day you bought it to the day you sell it.

• Short-term capital gain: profit on units held 12 months or less. It is taxed at 20% (section 196).
• Long-term capital gain: profit on units held more than 12 months. Only the part above ₹1,25,000 in a tax year is taxed, at 12.5% (section 198).

These rates have applied since 23 July 2024.

A long-term example. Suppose you sell units held for more than 12 months at a gain of ₹1,60,000. You have no other long-term equity gains that tax year. The taxable part is ₹1,60,000 minus ₹1,25,000, which is ₹35,000. Tax at 12.5% is ₹4,375. Health and Education Cess adds 4% of that, or ₹175. You pay ₹4,550.

A short-term example. Suppose instead you sell units held 12 months or less at a gain of ₹55,000. Tax at 20% is ₹11,000. Cess adds ₹440, so you pay ₹11,440. The ₹1,25,000 allowance does not apply to short-term gains.

Both examples assume no surcharge, an extra charge on the tax once total income passes ₹50 lakh.

TDS is tax deducted at source, before money reaches you. There is no TDS on a resident's gains from selling units. The 10% TDS applies to IDCW above ₹10,000. IDCW is a payout from the fund's income or gains. It lowers the NAV, the price of one unit, by the amount paid. IDCW is taxed at your normal income-tax rates, and any TDS is credited against your tax for the year.

The fund's own income is exempt, so its trades create no tax for you.

Multi cap suits someone who wants SEBI's floors to fix the size mix; flexi cap leaves that mix to the manager.

Here is what each rule asks of the manager:

• Multi cap: at least 75% in shares, with at least 25% each in large, mid and small caps. Rule in force since 11 September 2020.
• Flexi cap: at least 65% in shares, of any size. The category rule comes from SEBI's circular of 6 November 2020.
• Large and mid cap: at least 35% in large caps and at least 35% in mid caps. No small cap share is required.

So the floors force the fund to keep small caps. At least ₹25,000 of every ₹1,00,000 stays at rank 251 or lower, in good years and bad. A flexi cap manager has no such floor. A large and mid cap fund has no small cap floor either.

The risk labels look alike. Every listed flexi cap fund read Very High on 29 September 2026. So did every listed large and mid cap fund.

Koshex suggests 7 years or more for multi cap. For flexi cap, 5 years or more; for large and mid cap, 5 to 7 years. None of these is a SEBI rule.

Start with each fund's three-year and five-year CAGR, set against the category averages. CAGR is the average yearly growth rate over a period, as if the fund had grown at the same pace every year.

Of 35 listed multi cap funds, 22 have a three-year record. Their average three-year CAGR is 6.6%. Funds with five years of history average 11.9%. Some funds are too young for a five-year figure, so that average may rest on fewer funds.

Then look at cost. The expense ratio is the fund's yearly fee, shown as a percentage of your money and taken out of the fund's value. The law caps the fee, before trading costs and taxes. An actively managed equity-oriented scheme may charge up to 2.10% a year on its first ₹500 crore. The cap steps down on larger amounts, to 0.95% on the balance. The table shows what each fund actually charges.

AUM, or assets under management, is the current total value of the money a fund manages. It is not the amount people paid in. Together, listed multi cap funds hold ₹2,55,852 Cr.

Check the riskometer column too. If a fund's level changes, it must tell investors by email or SMS.

Koshex reviews your holdings and flags changes, such as a fund's category, risk or ranking shifting.

Both routes buy the same fund; they differ in timing. A SIP invests a fixed amount at regular intervals, usually monthly. A lumpsum invests a larger amount at one time.

Each SIP instalment buys units at that day's NAV and starts its own 12-month tax clock. A unit bought on 10 March 2027 turns long-term only if sold after 10 March 2028.

A lumpsum suits money you already hold, such as a Diwali bonus. A SIP suits a monthly salary. You can try both on the SIP calculator and the lumpsum calculator.

How much fits is a separate question. A multi cap fund already spreads money across all three sizes by rule. If you also hold large, mid or small cap funds, you add to the same size bands. Three things decide how much belongs here:

• how long the money can stay invested
• what other equity funds you already hold
• how large a fall you can sit through, like the ₹25,000 slice shrinking to about ₹6,700 above

Koshex helps you choose a fund that suits your goal and timeline.