Equity Fund Types in India: Classification, Structure, and How They Work

Structure determines portfolio behaviour
Each equity fund category follows SEBI-defined rules. Large cap funds invest in the top 100 companies, which tend to be relatively stable, whereas small cap funds invest in companies ranked 251st and beyond, which may show sharper price movements. Mid cap funds sit between these segments, reflecting a mix of growth and variability.

Risk varies across categories
Funds investing in smaller companies generally show higher volatility compared to those in large companies. Flexi cap funds can adjust allocations across segments depending on market conditions, while multi cap funds must maintain fixed minimum exposure across large, mid, and small cap stocks.

Active vs passive approaches
Some equity funds track indices, while others actively select stocks. Focused funds invest in a limited number of high-conviction positions (up to 30 stocks), whereas diversified funds spread investments across a wider set of companies.

Large Cap Funds
Large cap funds invest at least 80% in India’s top 100 companies. These are typically established businesses with relatively stable earnings profiles. DSP Large Cap Fund illustrates how portfolios in this category are built around market leaders.

Mid Cap Funds
Mid cap funds invest a minimum of 65% in companies ranked 101st to 250th. These businesses are often in a growth phase and may expand faster than large caps, but with higher variability. The DSP Mid Cap Fund reflects this segment by focusing on companies with evolving business models and growth potential.

Small Cap Funds
Small cap funds invest at least 65% in companies ranked 251st and beyond. These companies may be earlier in their lifecycle and can experience significant fluctuations. DSP Small Cap Fund illustrates how portfolios in this category are constructed around emerging businesses.

Flexi Cap Funds
Flexi cap funds invest a minimum of 65% in equities without restrictions on market capitalisation. This allows fund managers to shift allocations across segments based on valuations and market conditions.

Multi Cap Funds
Multi cap funds must allocate at least 25% each to large, mid, and small cap stocks, ensuring consistent diversification across segments. DSP Multicap Fund reflects this structure by maintaining balanced exposure across company sizes.

Focused Funds
Focused funds invest in a limited number of stocks, typically up to 30. This concentrated structure means individual stock performance can significantly influence outcomes. DSP Focused Fund illustrates how high-conviction portfolios are constructed within this category.

Value Funds
Value funds invest in companies considered to be trading below their intrinsic worth, relying on fundamental analysis to identify such opportunities. DSP Value Fund reflects this approach, including exposure to both Indian and global companies.

ELSS (Equity Linked Savings Scheme) Funds
ELSS funds have a 3-year lock-in period and may qualify for tax benefits under Section 80C under the old tax regime. DSP ELSS Tax Saver Fund is an example of how equity exposure and tax-linked features are combined in this category.

Sector and Thematic Funds
Sector funds focus on a single industry, while thematic funds invest across related sectors. DSP Healthcare Fund focuses on healthcare-related businesses, while DSP India T.I.G.E.R. Fund invests in companies linked to infrastructure and economic development themes. These funds are more concentrated than diversified categories.

Tax rules are based on current provisions and may change.

DSP offers mutual fund schemes across equity categories, aligned with different investment approaches and market segments. Explore the full range on DSP equity mutual funds or begin investing through the DSP Invest portal. SIPs are available from ₹100 per month.