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Large-Cap, Mid-Cap & Small-Cap Funds Explained

Updated 2026-11-03

Equity mutual funds are often categorised by the size of the companies they invest in — large-cap, mid-cap, or small-cap. SEBI defines these tiers precisely, so the labels mean the same thing across fund houses.

The SEBI market-cap tiers

The definitions follow the same ranking as individual stocks: the top 100 companies by market cap are large cap, ranks 101–250 are mid cap, and 251 onward are small cap. A large-cap fund must invest predominantly in that top-100 universe, and so on.

Risk and return trade-off

  • Large-cap funds — more stable, lower volatility, steadier (often lower) long-run growth.
  • Mid-cap funds — a middle ground: more growth potential, more risk.
  • Small-cap funds — highest growth potential but the most volatile; can fall hard in downturns and suffer from liquidity issues.

Flexi-cap and others

There are also flexi-cap funds (free to invest across all tiers) and multi-cap funds (mandated minimums in each). Which stocks a fund actually holds, and in what tier, is visible in its portfolio holdings.

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