Mutual Fund Categories

Flexi Cap Mutual Funds: How They Work and What Makes Them Different

Last updated: Jun 14, 2026 3 min

Most equity fund categories come with constraints. Large cap funds must put 80% in the top 100 companies. Mid cap funds must put 65% in companies ranked 101 to 250. Flexi cap funds have no such requirement. The fund manager can allocate capital across large, mid, and small-cap companies in any proportion, based on where they see the best opportunities at any point in time.

SEBI introduced the flexi cap category in 2020. It requires a minimum of 65% in equity and equity-related instruments with no mandatory split across market cap segments. Returns are market-linked and not guaranteed.

During periods when large-cap stocks appear better valued or when uncertainty is high, a flexi cap fund may tilt toward large caps for stability. When growth opportunities look stronger in mid or small-cap companies, the fund may shift allocation in that direction. This is an active judgment call made by the fund manager, not a rules-based rebalancing.

This approach can be seen in the DSP Flexi Cap Fund, where stock selection and allocation decisions are driven by internal research rather than index weights.

Because the portfolio can shift meaningfully across market cycles, how a flexi cap fund behaves in one phase may look quite different from another. The fund's character depends heavily on the investment team's approach.

Feature	Flexi Cap Fund	Multi Cap Fund	Large Cap Fund	Mid Cap Fund
Minimum equity	65%	75%	80%	65%
Large-cap minimum	None	25%	80%	None
Mid-cap minimum	None	25%	None	65%
Small-cap minimum	None	25%	None	None
Allocation flexibility	Full	Constrained	Constrained	Constrained

The key difference between flexi cap and multi cap is that multi cap funds must maintain at least 25% each in large, mid, and small cap stocks as per SEBI regulations. Flexi cap funds have no floor in any segment.

Flexi cap is a SEBI category, not a single investment style. Portfolio construction can differ meaningfully across funds within the same category. Some funds prioritise quality, favouring companies with strong financial metrics and governance. Some actively shift allocation across market cap segments based on valuations. Some run concentrated portfolios with high conviction in fewer stocks, while others maintain broader diversification. These differences influence how individual funds perform across market cycles.

Flexi cap funds carry equity risk across all market cap segments. When the portfolio is tilted toward mid or small caps, volatility may be higher. When concentrated in large caps, it may be lower. Since allocation decisions are discretionary, outcomes depend significantly on the investment team's judgment. Past performance reflects the conditions during a specific period and does not indicate future outcomes.

Flexi cap funds qualify as equity oriented mutual funds for tax purposes. STCG at 20% applies on units held 12 months or less. LTCG at 12.5% applies on gains above ₹1.25 lakh per financial year for units held more than 12 months. Tax rules are subject to change.

Key Takeaways

Flexi cap funds invest at least 65% in equity with no mandatory split across large, mid, or small cap.
The fund manager can shift allocation freely based on market conditions and valuations.
Unlike multi cap funds, there is no floor allocation requirement for any segment.
Portfolio behaviour can vary significantly across market cycles depending on the fund manager's approach.
STCG: 20% within 12 months. LTCG: 12.5% above ₹1.25 lakh exemption after 12 months.

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Frequently Asked Questions

Does a flexi cap fund always hold a mix of large, mid, and small cap?

Not necessarily. There is no minimum allocation requirement for any segment. The portfolio composition can vary significantly based on the fund manager's view at any point.

Is there a lock-in period?

No. Flexi cap funds do not have a mandatory lock-in, though exit loads may apply as per the scheme's terms.

How is a flexi cap fund different from a multi cap fund?

Multi cap funds must maintain at least 25% each in large, mid, and small cap stocks. Flexi cap funds have no such constraint.

What is the minimum SIP amount?

SIP investments typically start from ₹100 per month, subject to scheme-specific terms.

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Disclaimer

DSP Mutual Fund – SEBI Registration No.: 036/97/7

This email/note is for information purposes only. The recipient of this material should consult an investment/tax advisor before making an investment decision. In this material DSP Asset Managers Pvt. Ltd. (the AMC) has used information that is publicly available, including information developed in-house and is believed to be from reliable sources. The AMC nor any person connected does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Past performance may or may not be sustained in the future and should not be used as a basis for comparison with other investments. There is no assurance of any returns/capital protection/capital guarantee to the investors in above mentioned scheme.

Large caps are defined as top 100 stocks on market capitalization, mid caps as 101-250 small caps as 251 and above.

For complete details on investment objective, investment strategy, asset allocation, scheme specific risk factors and more details, please read the Scheme Information Document, and Key Information Memorandum of the scheme available on ISC of AMC and also available on www.dspim.com.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.